G-20 Missed the Point: The Real Wealth of Nations is People

With the near-exclusive use of GDP growth at the G-20 as the central measure of societal success, we risk falling short of these lofty goals by a long shot.
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As often happens, the just-completed Pittsburgh G-20 meeting ended with admirable pronouncements, among them, the "responsibility to invest in people by providing education, job training, decent work conditions, health care...and to fight poverty, discrimination, and all forms of social exclusion". But with the near-exclusive use of GDP growth as the central measure of societal success, we risk falling short of these lofty goals by a long shot.

Just as a high personal net worth is no proof against cancer, so, too, a high GDP fails to demonstrate national vigor. As then-Presidential candidate Robert F. Kennedy noted in 1968, GDP, the final cost of goods and services produced within a country in a year, goes up with the sale of nuclear warheads, and counts both special locks for our doors and the jails for those who break them. At least as important as what GDP counts is what it omits: unpaid labor in the form of child and elder care, wide gaps in earnings between whites and citizens of other races, and more.

A report this month from Nobel laureate economists Amartya Sen and Joseph Stiglitz suggested that it's time to change the way GDP is calculated, noting that an increase in automobile driving raises GDP, even as environmental damage and time lost to traffic jams goes unmeasured.

By several other important gauges, such as outcomes in health and education, America has slipped behind many other countries in recent years. But our still-high GDP has enabled policymakers to ignore the slippage. And what we don't notice, we can't address.

Fortunately, we don't need to cast about for brand-new, untested measures. Inspired by Pakistan's onetime minister of finance, Mahbub ul Haq, who had noticed that many ostensibly successful development programs failed to manifest as concrete improvements in people's lives, and by the poverty studies of Professor Sen, the United Nations Development Programme began in 1990 to rank every country in the world on its citizen's health, education, and standard of living. Drawing on this same measure, a recent project of the New York-based Social Science Research Council has used governmental data to develop an American Human Development Index. Our research shows that while America's GDP is second to none, and while we spend far and away the most on health care, our average life expectancy lags behind that of virtually every other advanced economy. Japan spends about one-third of what the U.S. spends on health care per person, yet the Japanese outlive Americans by an average of four years.

GDP tells us about the contribution of mothers who work, but nothing about their caring labor as parents, often overstretched and overstressed, trying to balance their work and family responsibilities. If it did, perhaps we would not find the U.S. one of fewer than five countries in the world whose mothers lack federally mandated paid maternity leave. (Two of the others: Somalia and Papua New Guinea.)

And while gross state product tells us that Louisiana's economy has rebounded nicely from Hurricane Katrina as a result of recovery dollars and large-scale rebuilding, that rise has done next to nothing for African Americans who were disproportionately harmed by that storm. Using Census Bureau data, we find median earnings for African Americans in that state less today than the average American earned in the mid-1960s. Whites earning the least have wages and salaries on par with those of African Americans earning the most.

An near-exclusive focus on the data used to measure market activity means that other data receive lower priority. We release inflation figures, trade deficits, and personal income monthly, with a one-month delay. Infant death figures, however, show up only after a three-year delay. By the time we spot a trend, it's too late. If we want our citizens to lead long, healthy lives --and who doesn't-- we must give the non-economic measures that tell how people are faring more weight.

We don't suggest the GDP be abolished. Market activity and production tell an important part of a nation's story. But the Human Development Index is a road-tested measure of well-being that can be an essential supplement. Adding data on health, education and other basic building blocks of a life of opportunity and value, and capturing the gaps between groups, would fill out our story. And after all, the American people are the real wealth of our nation.

Sarah Burd-Sharps and Kristen Lewis are co-authors of The Measure of America: American Human Development Report 2008-2009

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