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G20: Stiglitz and Sen Come In Too Late
Analysis by Julio Godoy
BERLIN, Sep 23 (IPS) - A new report on Measurement of Economic Performance and Social Progress
presented earlier this month in Paris by Nobel prize winners Joseph Stiglitz and
Amartya Sen is a late, and quite modest contribution to an old debate, many
experts say.
Not many believe it can influence the discussions at the G20 in Pittsburgh
Sep. 24 and 25.
Stiglitz and Sen prepared the report on the request of French President
Nicolas Sarkozy, and were expected to produce, as Sarkozy put it, "a
statistical revolution" on national and private enterprise accounts that would
leave behind standard economics indicators in use, such as the gross
domestic product (GDP).
But the report progresses little beyond other work under way over years to
develop indicators such as environmental degradation, health, and social
wellbeing.
"The elder among us economists are very amused," Christian Chavagneux,
editor of the French economics monthly Alternative Economiques, told IPS.
The first questioning of the value of GDP as indicator came in the 1970s,
Chavagneux said. "Since then, the number of alternative indicators of human
and economic well-being has gone from zero in the 1970s to some 30
today."
Prime among these, he said, is the human development index (HDI) used by
the UN Development Programme since 1990. The report considers measures
such as life expectancy, literacy and education besides the GDP. The HDI was
developed by Amartya Sen along with the renowned Pakistani economist
Mahbub ul-Haq.
In the 1980s, several economists and environmental activists noted that GDP
did not take into account deterioration of the environment, such as air
pollution caused by economic activities, especially industry and transport.
The GDP's failure to consider environmental degradation triggered research
on valuation of nature and the environment, and to integrate this into a new
indicator of economic activity and human wellbeing.
In 2007, the UN Environmental Programme, in cooperation with the European
Commission and the German and British ministries for the environment,
launched The Economics of Ecosystems and Biodiversity (TEEB) research
programme, aimed at measuring the economic significance of the global loss
of biological diversity.
TEEB studies "the global economic benefits of biodiversity, to highlight the
growing cost of biodiversity loss and ecosystem degradation and to draw
together expertise from the fields of science, economics and policy to enable
practical actions." The study's preliminary findings were released in 2008,
and a final report is due October 2010.
Pavan Sukhdev, an Indian economist who founded the national accounting
project Green Indian State Trust, is director of TEEB. The world's economy,
understood in the traditional sense, "is but a sub-set of the larger economy
of the natural resources and ecosystem services that sustain us," Sukhdev
tells IPS.
"In our interim report (of 2008) we looked at the extent of losses of Natural
Capital taking place as a result of deforestation and degradation," he said.
"This was estimated at between 2 trillion and 4.5 trillion dollars per year,
every year - a staggering economic cost of taking nature for granted."
Sukhdev said TEEB's final report will provide a "toolkit for policy-makers,
which will cover subsidies and incentives, environmental liability, new market
infrastructure, national income accounting, cost-benefit analysis, cost-
effectiveness analysis, and methods for implementing a Payment for
Ecosystem Services (PES) and Access and Benefits Sharing (ABS)."
TEEB will also give private enterprises information on "how to quantify and
disclose, mitigate or offset corporate impacts on ecosystems and
biodiversity." And, TEEB will aim to provide citizens with "information on the
value of ecosystems and biodiversity and examples of how to reduce their
impact on wild nature and influence producers through their private
purchasing decisions," Sukhdev said.
Another indicator complementary to GDP is the Index of Social Health,
developed in the U.S. in 1987 by the social scientists Marc Miringoff and
Marque-Louise Miringoff, professors at the Fordham University in New York.
The U.S. Index of Social Health, which is measured regularly, "is based on the
premise that the familiar economic measures, such as GDP, the stock market
indexes, balance of trade, the rate of inflation, and the like, do not provide us
with a sufficient assessment of our strength, progress, and well-being as a
nation and a people," Marque-Louise Miringoff, director of the Fordham institute for
innovation in social policy, and who produces the index, told IPS.
"In order to widen and deepen our national dialogue, bring it closer to our
daily concerns, and create more effective public policy, we need to carefully
monitor the social aspects of our national life, and acknowledge that these
also require our constant attention," she added.
To such developments, the Stiglitz-Sen report adds little. The main task of
the report, which Sarkozy commissioned in February 2008, was to consider
what additional information might be required for more relevant indicators of
social progress, to assess the feasibility of alternative measurement tools,
and to discuss how to present statistical information in an appropriate way.
Stiglitz and Sen, who worked together with other British, French, and U.S.
economists, made ten recommendations to policy makers. But the
recommendations do not appear as eminent as the authors are.
They call for greater emphasis on income and consumption rather than
production, to achieve a more appropriate evaluation of material wellbeing.
They also say that distribution of income, and not the average income per
capita, deserves a more important role in such an evaluation.
They say that non-market activities, such as services provided by families in
private households, must be taken into account to measure living standards.
The authors repeat the old demand of finding an appropriate measure for
nature and its depletion to be incorporated into national and private
enterprise accounts.
Some French commentators say Sarkozy is only trying to project that his
government is improving national wellbeing.
(END/2009)
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