Traditionally, our policies and decision-makers have used three basic measures of economic progress: gross domestic product (GDP), the rate of inflation and the rate of unemployment.
But how useful are these economic measures, especially in this time of recovery from the COVID-19 pandemic? Can they guide us in the use of our natural assets, for example, our bodies of water that provide food and means of transport, in our journey towards RICH sustainable development (regenerating, inclusive, climate-smart and healthy) that we, in the Climate Action and Sustainability Alliance (Casa), defend?
Like other countries, we use GDP to measure basic forms of capital, and human capital is partly taken into account. But natural capital, which includes our rich marine biodiversity, is not included in GDP.
The other two basic economic measures – the inflation rate and the unemployment rate – give mixed signals to guide our economy forward, due to various stimuli used by the government to facilitate the recovery process and many economic disruption to control the spread of the virus which has created havoc in industry and in all societal activities.
Our current economic system and the measures of progress we use focus on capital that can be quantified and measured to produce monetary values ââthat reflect our material growth. But we don’t rigorously measure how such growth affects the well-being of our people and our natural capital. We are trying to do it, but not adequately.
We now need to seriously develop the kind of economy and economic measures that will allow us to take into account the well-being of our people and our natural assets – a welfare economy (WE), the economy we have. need for sustainable recovery and growth.
New economy and measures of progress
Clameur pour WE is now expanding globally. It is an economy which âseeks human and ecological well-being rather than material growthâ. This clamor is led by the Well-Being Economy Alliance (WEAll), a collaboration of organizations, alliances, movements and individuals.
The WE concept does not reject GDP although other economic measures to replace it are increasingly being developed by various groups in different countries. Instead, it adds the measure of the other two basic forms of capital – human and natural capital – and focuses more on their well-being which, admittedly, may not be fully quantified and monetized.
Some quantifiable economic measures affecting human capital – for example, âhousehold consumption of goods and servicesâ – 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 the well-being of those affected, which is influenced by personal circumstances and life choices, can neither be fixed nor measured with precision.
The treatment of natural capital is equally difficult, although it may be easier to do with scientific methods, for example, scientific measurement of changes in marine biodiversity.
What is clear is that in WE we have to consider other indicators with the GDP that reflect social and environmental conditions. These indicators include the quality of governance which affects the freedom of choice of individuals. Some of these indicators, for example, self-reports from self-report surveys (with simple questions, such as, how satisfied is a person with their life and what factors (income, health, education, etc.) make it feel?) are subjective, while others are objective, e.g. household income. Interest in developing such indicators is now increasing in some countries, for example gross national happiness in Bhutan.
WEAll’s vision is to make the transition to WE in 10 years. The identification and definition of appropriate economic measures to cover human and natural capital is most difficult. But we have to do them. As the saying goes “We cannot manage what we cannot measure”.
Since the 1970s, when scientists, various organizations and even governments started the âBeyond GDPâ movement, many alternatives have been proposed to include women’s domestic work, environmental damage and the like. Some of them are single measures, like the real indicator of progress and others are called âdashboardsâ, like the 17 Sustainable Development Goals.
After about 50 years, GDP remains the primary economic metric due to several factors that I will discuss during the webinar that the Center for Strategy, Enterprise and Intelligence (CenSEI) is hosting on Monday at 1 p.m. We will announce the link to the recording in Casa’s Facebook group.
Example of WE initiative
Since most of our readers are in business, I will cite an example of a WE in business initiative: circular production, the heart of a circular economy (CE).
Our circular economy follows a linear process where raw materials, which are usually extracted from nature, are turned into products, with some waste, then used and discarded to produce more waste. A report in the literature estimates that “over 300 million personal computers are scrapped each year, causing significant environmental damage from lead and mercury.”
In contrast, WE follows a circular process, which begins with a design that avoids waste and pollution, reduces the consumption of materials and energy in production, and helps regenerate the natural ecosystem.
Flor’s Garden in Antipolo and Nurture Wellness Village in Tagaytay. Their business strategies and activities effectively cover both their human and natural capital, from the design of the services they provide to the local production of vegetables and herbs in the foods they serve to their customers.
The next step is to develop quantifiable measures for these PE strategies and initiatives so that they can be included in the economic measurement of progress.
WE Economy basic initiative
Casa, through our group on Recovering with Nature, co-chaired by the newly elected MAP governor and former secretary of socio-economic planning Ciel Habito and Atty. Ipat Luna, a former official in the Ministry of Environment and Natural Resources, worked with Vice President Loren Legarda on the Philippines Ecosystem and Natural Capital Accounting System (House Bill No. 9181, or Pencas Bill). This supports the United Nations SEEA (Environmental and Economic Accounting System), which the Statistical Authority of the Philippines has started to implement. It also identifies government agencies and sectors that should participate in identifying, valuing and accounting for our natural capital, ecosystems and the services they provide.
We need to support and promote the early approval of Pencas and subsequently help accomplish these tasks – from identifying to accounting for our natural capital – so that we can measure its growth or depreciation. But we must also take care of our human capital and develop appropriate economic measures for them. INQ
This article reflects the personal opinion of the author and not the official position of the Management Association of the Philippines (MAP). The author is the coordinator-president of the Climate Action & Sustainability Alliance (CASA) and sits on the board of directors of organizations on climate change, sustainable development, science and technology, education and communication.
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