MAPping the Future

GDP is Never Enough (2nd of 2 Parts)

 

In my previous article, Blindsided By The Market, I explained the need for robust institutions and a socially-oriented mindset to counter two side effects of the neoclassical market model – devaluation of the priceless and inequality of wealth. These side effects are called externalities. Left alone, the market has no mechanism to explain and support them. The idea of economic man is also precarious, not because it is useless but because it is incomplete. Yes, we’re individualistic, utilitarian, and rational, but we’re also social, altruistic, and emotional.

 

Economic well-being and national economic growth have been preoccupations if not the primary concerns of individuals and societies. We’ve come to measure progress predominantly through Gross Domestic Product (GDP), a standard measure of national economic activity. Gross National Product (GNP) and Gross National Income (GNI) are similar measures, but let’s stick to GDP for our purpose here. In the frenzy of economic activity, we forget that our holistic well-being lies in economic achievement and beyond. Therefore, we should enrich our GDP yardstick with measures that internalize the externalities and reflect our social, altruistic, and emotional nature.

 

Unfortunately, not enough attention is paid to non-economic indicators in the press or public discourse because GDP is what gets you a privileged seat at the table, whether at the G20 (a forum of the largest global economies) or ASEAN. We must complement GDP with measures that track the abilities of the state and society to provide the basic conditions for holistic human flourishing while keeping within ecological limits. Basic conditions include food, healthcare, education, water and sanitation, work, housing, and security. Ecological limits stop climate change, chemical pollution, ozone depletion, and air pollution.

 

Well-Being Yardsticks

 

Researchers and advocates who believe that GDP is lacking have identified indices that include or focus exclusively on non-economic outcomes that reflect human flourishing or floundering. Here are three of those indices.

 

UNDP’s Human Development Index (HDI) includes indicators on life expectancy, knowledge, and GNI per capita. Norway is the top country. The Philippines is 107th out of 189.

 

The World Happiness Index (WHI) by the Sustainable Development Solutions Network covers GDP per capita, social support, life expectancy, freedom to make life choices, generosity, and perceptions of corruption. Finland, another Scandinavian country, tops it. Norway is no. 5. The Philippines is 52nd out of 153.

 

The Social Progress Index (SPI) by the Social Progress Imperative measures basic human needs like healthcare and water; foundations of well-being like education and environment; and opportunity like rights and freedom. Again, Norway is on top. Finland is the 3rd. The Philippines is 98th out of 163. I prefer SPI because it excludes GDP from its indicators. As such, SPI allows studies of how social progress varies relative to GDP (and other economic indicators) and vice versa.

 

Collab Imperative

 

HDI, WHI, and SPI are supportive of the seventeen UN Sustainable Development Goals (SDGs). In the Philippines, at the enterprise level, multinational corporations Unilever, P&G, Nestle, and Colgate-Palmolive, and locals Ayala, Metro Pacific, and SM have declared their support for SDGs. The SEC released its Sustainability Reporting Guidelines for Publicly-Listed Companies in 2018. The Bangko Sentral ng Pilipinas through circular 1085 paved the way for banks’ environmental and social reporting. Corporate responses to SDGs vary. Some are indifferent.

 

Others pretend to adopt sustainability practices for image building alone. This pretension is prevalent enough to deserve its own label: greenwashing, the whitewashing of sustainability practices.

 

Some do only what contains costs or generates revenue. Finally, others move towards zero impact or even take an exemplar role in social and ecological sustainability.

 

The pursuit of most SDGs, is either mandated by law or adopted through self-regulation. As consumers and producers, and in our non-economic roles as spouses, parents, children, caretakers, friends, citizens, voters, collaborators, and volunteers, we are catalysts for the broad adoption of sustainability practices. This pursuit is as much a collaborative effort as it is an individual one. The Pasig River will never get cleaned up if only some manufacturers treat their wastewater while others don’t. Basic human sustenance will stay beyond reach if only some pay minimum wages while others don’t. Corporate tax havens will continue if only some countries abide by a global minimum tax rate with others don’t. Worse, the select do-gooders turn uncompetitive, and the market punishes them.

 

I recognize that the ideas in this article and the previous one bear on many policies – cash transfer, universal healthcare and education, progressive taxation, labor, competition, corporate reporting, investments and credit, environmental and safety compliance, corruption, and much more. I don’t attempt to put forward any policy recommendations here. But, I do attempt to shine the light on the following:

 

1. Robust institutions and a socially-oriented mindset should inform the roles of markets, government, institutions, and our identities and values. They should enrich the way we think about our society’s challenges, priorities, and solutions.
2. GDP is not and never enough. We are both individualistic and social. Our fulfillment heavily relies on understanding ourselves, so we must pursue a balanced mix of goals and hold ourselves accountable to holistic indicators.

 

Many social and ecological problems I mentioned are like Covid-19. We can’t solve them anywhere if we don’t work to solve them everywhere. Our futures are inseparably bound on these ones and can be solved only through collaboration.

 

Share, Speak Up, Show the Way

 

In closing, I invite you to share, speak up, and show the way. Share successes of good governance and strong institutions. Share successes of socially-minded initiatives for poverty alleviation, education, and healthcare. Speak up against mismanagement, social inequity, and ecological abuse. Pick your fights, but speak up. Show the way to providing basic conditions for holistic human flourishing within ecological limits. Good governance, social concern, environmental care start with the individual but inspire others only when authentically displayed.

 

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP. The author is a member of MAP NextGen Committee, Founder and CEO of technology firm Synerbyte Ltd., and author of the book Sh*tty Places & Selfish People: 7 Rules of Engagement. Reach or follow him at www.linkedin.com/in/cliffeala/, www.facebook.com/cliffeala, www.instagram.com/cliff.m.eala/, or cliff@cliffeala.com)