Our Current Economy and its Main Measures of Progress

 

Traditionally, our policy and decision makers use three basic measures of economic progress: Gross Domestic Product (GDP), inflation rate, and unemployment rate.

 

But how useful are these economic measures, especially during this period when we are recovering from the COVID 19 pandemic? Can their observed behavior adequately guide us in ensuring that our recovery will promote the wellbeing of our people? Can they guide us in using our natural assets, for example, our water bodies that provide food and means of transport, in our journey towards a RICH (Regenerative, Inclusive, Climate-smart, and Healthy) sustainable development that we, in the Climate Action and Sustainability Alliance (CASA), are advocating for?

We have mainly three forms of capital–a) manufactured goods and services including technologies that can be monetized, b) human capital, and c) natural capital—our ecosystems and the services they provide. Just like other countries, we use GDP to measure (a). The other basic capital forms, (b) human capital, is partly accounted for in GDP but (c) natural capital, which includes our rich marine biodiversity, is not included in GDP.

 

The two other basic economic measures–inflation rate and unemployment rate–give mixed signals in  guiding our economy to move forward, due to various stimuli used by government to facilitate the recovery process and numerous economic disruptions to control the spread of the virus that have created havoc in industry and all societal activities.

 

Our current economic system and the measures of progress that we use are focused on capital that can be quantified and measured to produce monetary values that reflect our material growth. But we do not rigorously measure how such growth affects the wellbeing of our people and of our natural capital. We try to do it, but not adequately.

 

We must now seriously develop the type of economy and the economic measures that will enable us to account for the wellbeing of our people and natural assets — a Wellbeing Economy (WE), the economy we need for sustainable recovery and growth.

 

A New Economy and its Measures of Progress

Clamor for WE is now growing globally. That’s an economy that “pursues human and ecological wellbeing instead of material growth.”  This clamor is being spearheaded by the Wellbeing Economy Alliance (WEAll) — “a collaboration of organizations, alliances, movements and individuals working towards a wellbeing economy.”

 

The WE concept does not reject GDP although other economic measures to substitute for it are now increasingly being developed by various groups in different countries. Instead, it adds the measurement of the two other basic capital forms– human and natural capital and focuses more on their wellbeing that, admittedly, may not be completely quantified and monetized.

Some quantifiable economic measures affecting human capital, for example, “household consumption of goods and services,” now exist. They can be quantified and measured with monetary values, which can then be added to GDP calculations. But the relationship of such measures to wellbeing of the people concerned, which is influenced by personal circumstances and lifestyle choices, cannot be fixed nor measured precisely.

 

Treatment of natural capital is as challenging although it may be more easily done with scientific methods, for example, scientific measurement of changes in marine biodiversity.

 

What is clear is, in WE, we must consider with GDP other indicators that reflect social and environmental conditions. These indicators include the quality of governance that affects people’s freedom of choice.  Some of these indicators, e.g., self-reports from self-assessment surveys (with simple questions, such as, how satisfied a person is with his life and what factors—income, health, education, etc.– make him feel so?) are subjective, while some are objective, e.g.,  household income. Interest to develop such indicators is now growing in some countries, for example, the Gross National Happiness (GNH) in Bhutan,

 

WEAll’s vision is to achieve transition to WE in ten years. The identification and definition of appropriate economic measures to cover the human and natural capital are most challenging. But we must do them. As the saying goes “We can’t manage what we can’t measure.”

 

Since the 1970s, when scientists, various organizations and even governments launched the movement on “Beyond-GDP,” numerous alternatives have been proposed to include household work of women, environmental damages, and others. Some of them are single measures, such as the Genuine Progress Indicator (GPI) and some are referred to as “dashboards,’ such as the 17 Sustainable Development Goals (SDGs).

 

After about 50 years, GDP remains as the main economic measure due to several factors that I shall discuss at the webinar that the Center for Strategy, Enterprise and Intelligence (CenSEI) is holding on Nov. 29, at 1 PM. We shall announce the link to the recording in the Face Book Group of CASA.

 

Sample WE Initiative

 

Since most of our readers are in business, I will cite a sample WE initiative in business—circular production, the heart of a Circular Economy (CE).

 

Our current economy follows a linear process where raw materials, which are usually extracted from nature, are processed into products, with some waste, then used and discarded to produce more waste. One report in the literature estimates that “over 300 million personal computers are discarded each year, resulting in significant environmental damage from lead and mercury.”

 

In contrast, WE follows a circular process, which starts with a design that avoids waste and pollution, reduces materials and energy usage in production, and helps regenerate the natural ecosystem.

 

Two examples of WE businesses in our country that practice circular production, as well as attend to the wellbeing of their human capital, their employees, and of their natural assets, trees, weeds, etc. in their environment, are Flor’s Garden in Antipolo and Nurture Wellness Village in Tagaytay. Their business strategies and activities effectively cover both their human capital and natural capital—from the design of services they offer to the local production of vegetables and herbs in the food they serve to their customers.

 

The next step is to develop quantifiable measures for such WE strategies and initiatives so that they may be included in economic measurement of progress.

 

A Basic Initiative for a Wellbeing Economy

 

CASA, through our group on Recovering with Nature, co-chaired by newly elected MAP Governor & former Socioeconomic Planning Secretary Dr. Ciel Habito & Atty. Ipat Luna, former DENR official and now an officer of the Gerry Roxas Foundation, worked with Deputy Speaker Loren Legarda to redraft her original PEENRA Bill. The result is the Philippine Ecosystem and Natural Capital Accounting System (PENCAS Bill or House Bill 9181).

 

The PENCAS Bill supports the UN SEEA (System of Environmental-Economic Accounting), which the Philippine Statistical Authority (PSA) has started to implement. It also identifies the government agencies and sectors that must participate in undertaking the identification, valuation, and accounting of our natural capital –the ecosystems and services they provide.

 

We must support and promote the early approval of the PENCAS or HB 9181 and, thereafter, help  in performing those tasks—from identification to accounting of our natural capital–so that we can measure its growth or depreciation.  But we must attend as well to our human capital and develop proper economic measures for them. #

 

(This 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, a Life Member of MAP, is former Chair of the MAP Sustainable Development (SD) Committee. She is Convenor-Chair of Climate Action & Sustainability Alliance (CASA) and serves as Board Director of organizations on climate change, SD, science and technology, education and communication.