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Symposium 2015

Solution for New Indicators of Progress: How to Make a Difference to Policy and Politics

The Challenge

Despite growing recognition from many senior politicians and officials that progress is not just about economic growth, and that economic growth (as measured by GDP) should not be the overriding goal ...

Despite growing recognition from many senior politicians and officials that progress is not just about economic growth, and that economic growth (as measured by GDP) should not be the overriding goal of government, the day-to-day reality is that GDP growth does persist as a central focus. For example, whilst France is recognised as having lead the way in the ‘Beyond GDP’ agenda with the Stiglitz Commission arguing for a shift in focus from production to wellbeing, the French President Hollande was recently quoted as saying "I will do everything to make growth as high as possible.” This primacy of growth risks other objectives, including social and environmental goals, being sidelined. Indeed, whilst economists often say that economic growth is only a means to an end, and that that end is wellbeing, there is reason to believe that some decisions are taken which favour increasing economic growth at the expense of wellbeing.

An Alternative Concept of Growth

The Danish political party the Alternative was officially established in November 2013. The main goals were to achieve a “serious sustainable transition,” a new political culture and better conditions for entrepreneurship. The Alternative is critical towards pursuit of economic growth as a primary goal for policy-makers and desires a new understanding of growth. This entails a new concept of growth that measures well-being and happiness as well as the degree of environmental and economic sustainability. The aim of having such a concept is of course to help focus political and social efforts on enhancing this type of growth as opposed to traditional economic growth (The Alternative, 2014).

The previous leftwing government aimed to create a green growth measurement standard, which subtracted the costs of resource depletion, due to national production and consumption, in the national GDP (Rothenborg and Østergaard, 2011). The aim was to support a more sustainable economic development. Unfortunately, this process was not completed as it was very difficult to calculate the costs of resource depletion in monetary terms. This reflects a scientific debate on whether it makes sense to combine natural and economic (and perhaps social) development into a single measurement standard (Daly and Farley, 2010). Another approach is to have a multidimensional concept of growth/development as the country of Bhutan has and the New Economics Foundation (NEF) is proposing (Kelly, 2012).

The Alternative is in favor of the last approach, as this approach leaves space for a much more holistic understanding of growth and development. The party proposes to set up a Danish commission to examine how a new concept of growth can be established and which supports a serious sustainable transition. This requires a change so growth is measured in three separate categories, which encompasses standard economic indicators as well as social and environmental indicators for development. The economic indicators could be GDP, levels of public and private debt, balance of payments, inequality, etc. The social measures can include well-being, unemployment, amount of leisure time, fulfilment of basic needs, and participation in democracy. These are all elements that contribute to social justice and a meaningful life. The environmental measures should aim to describe the degree of environmental sustainability in society. This can be done using existing methods such as “the ecological footprint,” CO2-emissions, biodiversity, nitrogen and phosphor pollution, etc. (The Alternative, 2014).

The Alternative has experienced a lot of popular support to its policies and surprised all political commentators in the 2015 Danish parliamentary election. In this election, the party gained 4.9% of the total votes and now has 9 out of 179 seats in the Danish parliament. This is unusual for a new political party, so the messages resonate with parts of the population. Nonetheless, the challenge is to keep pushing for a new understanding of growth in a political climate, which focuses on growth in a traditional economic manner.

Other political parties have traditionally branded themselves as partly “green,” yet, most of them still favor economic growth over environmental concerns. As an example, in the previous leftwing government’s long-term economic 2020-plan, the term “economic growth” was mentioned hundreds of times and “sustainability” was not mentioned at all (Regeringen, 2012). This happened even though three out of four of the leftwing parties had a green profile at the time.

This might be due to a fear that a lack of growth will lead to rising unemployment and debt. In 2008, professor in environmental studies at York University Peter Victor showed that if an economy stops growing it results in a serious economic recession with serious social consequences. Yet, if a low growth scenario was combined with a series of policy proposals for changing the economic system, the result would be low unemployment, public debt as well as a reduction in poverty and CO2-emissions (Victor, 2008).

Consequently, it appears that the challenge is not simply about implementing a new concept of economic growth but also changing the conditions sustaining the current economic growth model. This is why the Alternative proposes radical reforms of the financial system in order to reduce Danish debt. In practice, the party and its supporters want a commission to investigate the consequences of implementing a sovereign money banking system, where private banks can no longer create new money by making loans.

A 2012 report supported by the IMF has shown that such a proposal would drastically reduce public and private debt (Kumhof and Benes). However, there is a need for further research in a Danish setting by a commission, before the reform could be implemented. In relation to unemployment, the Alternative proposes a gradual transition to a 30-hour working week to enhance well-being and lower unemployment as well as carbon emissions (Coote et al., 2010; Schor, 2013). This is challenging to achieve politically but the proposal is gaining increased support in the population, and significantly contributed to the political success of the Alternative during the 2015 elections. Another proposal is to create more jobs by transitioning to 100% organic agriculture in 2040, by creating more small-scale farms and accordingly have more people employed in the agricultural sector. The Danish NGO Dansk Naturfredningsforening has shown that this is a realistic proposal (Nygaard, 2015).

It remains to be seen whether or not the party will be able to achieve some of its policy goals and contribute to an economic development, which is sustainable and enhances the well-being of the population. A new concept of growth could assist supporting such a development as it would be easier to pin point whether the economic policies were driving the country in the desired direction. Such a growth concept would be required to be relatively easy to understand for the population, and easy to use for politicians in policy-making. Accordingly, NEF’s proposal is very interesting as it does not include too many different indicators.

In conclusion, there is a huge necessity for a new concept of growth or development, which is easily understandable as well as politically applicable. This concept would need to be supplemented by radical policy reforms changing the current economic system, so it can support increased well-being and environmental sustainability while being economically stable.

References

Benes, J., and M. Kumhof (2012). The Chicago Plan Revisited. International. IMF, Research Department, IMF Working Paper,12/202.

Coote, A., J. Franklin, and A. Simms (2009). 21 hours: why a shortened working week can help us to flourish in the 21. Century. New Economics Foundation: London.

Daly, Herman, and Joshua Farley (2011). Ecological Economics: principles and applications. Island Press.

Kelly, Annie (2012). Gross national happiness in Bhutan: the big idea from a tiny state that could change the world. The Guardian 1/12.

Nygaard, T. (2015). Debatoplæg: kan det betale sig at omlægge til økologi? Dansk Naturfredningsforening.

Regeringen (2011). Et Danmark der står sammen. Regeringsgrundlag.

Rothenborg, M., and M. Østergaard (2011). Danmark vil måle vækst på en ny måde. Dagbladet Politiken15/11.

Schor, J. (2014). The triple dividend. In A. Coote, and J. Franklin, Time on our side. Why we all need a shorter working week. New Economics Foundation: London.

The Alternative (2014). Political programme. <http://en.alternativet.dk/political-program/>

Victor, P.A. (2008). Managing without growth. Slower by design, not disaster. Edward Elgar Publishing Limited: UK.

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