Beyond GDP: How Broader Social Wealth Indicators Can Lead to Greater Economic Prosperity
WASHINGTON — National Indicators and Social Wealth, a new report from the Urban Institute and the Center for Partnership Studies, sheds new light on the political debate over the “fiscal cliff.” The report re-examines fundamental issues that GDP fails to address, and provides a more comprehensive way of measuring U.S. economic health and opportunities.
National Indicators and Social Wealth
For Release
Tuesday, December 11, 2012
BEYOND GDP:
HOW SOCIAL WEALTH INDICATORS
CAN LEAD TO GREATER ECONOMIC PROSPERITY
WASHINGTON — National Indicators and Social Wealth, a new report from the Urban Institute and the Center for Partnership Studies, sheds new light on the political debate over the “fiscal cliff.” The report re-examines fundamental issues that GDP fails to address, and provides a more comprehensive way of measuring U.S. economic health and opportunities.
The report proposes an alternative framework to GDP that focuses on economic success in the knowledge/service era and on how to cut through cycles of poverty. It shows the need for national investments in our “human infrastructure” (what economists call the “high quality human capital”) needed for the postindustrial age, such as investment in early childhood education, paid and unpaid care work (primarily done by women), lifelong education, innovation, and health care. The report goes beyond the moral and social justice arguments for investing in human well-being and development to a basic economic argument: that we can only ensure U.S. economic competitiveness in the post-industrial age by the exact opposite of the current rush toward cuts in health, education and welfare.
Based on a two-day meeting of nationally renowned economists in Washington, D.C., earlier this year, the report argues that the GDP, our main measurement of economic health, is inaccurate and incomplete. A major problem addressed by the report is that GDP inadequately assesses the value of caring for people, especially children, communities of color and the elderly, thus perpetuating cycles of poverty and impeding U.S. economic competitiveness.
“The default measure for economic and social progress is the GDP, the market value of all goods and services produced in a country in a given year,” says the report. “However, GDP is a limited metric that does not fully reflect the depth and breadth of a country’s economic activity.”
This new approach to measuring economic health has direct implications for how the ratio of debt to national product is calculated. Economic health is now based on what is included as “productive” in GDP. But GDP leaves out a great deal of “product” because it ignores anywhere from 30% to 50% of the actual economy: the economic value of caring for people, especially children and the elderly, in families, as assessed by government surveys: If we include this ignored sector of the caring economy as part of GDP, we would not have a “fiscal cliff” because the percent of debt to GDP ratio would be substantially lower.
But according to National Indicators and Social Wealth, this is only the tip of the iceberg. Inadequately assessing the economic value of caring for people not only perpetuates cycles of poverty; it also impedes U.S. economic competitiveness because it misdirects policies away from investment in human capacity development. By contrast, Social Wealth indicators identify and measure the key factors that promote optimal human and societal development to meet both human needs and the country’s needs the “high quality human capital” essential for success in the knowledge/service age.
Social Wealth indicators monetize the return on investment from funding early childhood care and education, which neuroscience shows is pivotal for human capacity development. It also includes metrics showing the huge economic value of unpaid care work (mostly done by women) drawing from time use surveys and other sources. Other Social Wealth indicators measure factors such as the economic and political participation rates for women, men and communities of color, and comparisons of U.S. infant mortality and functional illiteracy rates with other developed and emerging nations.
The Social Wealth indicators project was initiated by the Center for Partnership Studies to further research on new economic metrics, which still give little or no visibility to the economic value of care giving and early education as well as to the status and contributions of women, children, and communities of color. The meeting in Washington, D.C., reported in National Indicators and Social Wealth, brought together experts on national indicators from the U.S. Department of Commerce, other government agencies, NGOs and leading universities, including W. Steven Barnett, director of the National Institute for Early Education Research at Rutgers University, and Nancy Folbre, University of Massachusetts economist, McArthur fellow, and expert on time use metrics.
National Indicators and Social Wealth details the outcome of this meeting of experts and recommends “a coordinated effort that can change the way we think about and measure our economy, providing more realistic tools to navigate a very different social, political and economic reality than existed at the birth of the GDP.”
Contact:
Riane Eisler, President of CPS and author, The Real Wealth of Nations: eisler@partnershipway.org, 831-624-8337
Kimberly Otis: Director of CPS’ Caring Economy Campaign, kotisdc@gmail.com, 202-667-7236, 202-294-2398
Erwin de Leon: Research Associate, Urban Institute, and author of National Indicators and Social Wealth: EDeLeon@urban.org, 202-261-5677
