GDP, Nova Scotia's Broken Compass

How the economics of GDP is taking your family, your town, and your province in the wrong direction.

We Got To Get Off the Dope of Growth for Growth's Sake

I read in the Financial Times about the growing list of political leaders who are pushing to replace Gross Domestic Product, the main measure of economic success used in Nova Scotia, with a broader measure of human progress. This movement dates to Simon Kuznets, the Nobel laureate who invented the idea of GDP to quantify US losses during the Depression. Even Kuznets pushed for a better measuring tool, saying this crude tally of stuff bought and sold did not reflect a society’s well-being.

In 1968, Robert Kennedy famously said GDP measures everything “except that which makes life worthwhile”, including the health, education and welfare of children.

Economist Katrine Marcal may have put it best in her recent book when she asked “Who Cooked Adam Smith’s Dinner?” Spoiler alert, it was his mom. She and her work did not figure at all in the economics we’ve inherited from him. In Double Entry, Jane Gleeson-White’s history of accounting she devotes the final third of the book to GDP and the fact that how we do accounting can make or break the planet.

Researchers have proposed alternatives like the “gross national happiness” or “genuine progress indicator”, now the main contender alongside BLI, the “better life index” endorsed by the OECD. All aim to modify or replace GDP with social or environmental factors but disagree on the factors. It may be decades before the world settles on a new standard if that is at all possible.

Groth Without Prosperity

As experts debate, there's a real sense in the world, and Nova Scotia is on the very cutting edge of this, that rising growth rates and the symbols of progress are not lifting most people’s lot in life, not making households more prosperous.

The Financial Times says an interim fix is at hand: replace GDP with per capita GDP as the main target of policymakers and the key measure of progress. The math is to simply divide the GDP of the area by the number of people. Measuring GDP per person (or a rough average income) reflects progress on many social welfare indicators reasonably well, and captures a threat and opportunity that the new alternatives ignore: population change. Places with higher per capita GDP tend to have higher life expectancy and levels of social support, lower infant mortality and poverty levels, less air pollution, and corruption, and of course better environmental outlooks. It may help our fake fretting over population changes. Many of these measures are strong predictors of life satisfaction. The factor that best explains happiness survey results is per capita GDP.

Economic growth continues to be the measure of human progress, but is it? A measure so deeply ingrained in the system is hard to drop. But unlike the new alternatives, per capita GDP is available now in real time for most countries, and it’s more telling. It also makes direct comparison possible between average people living in different economies.

So where does Nova Scotia fit in the GDP per capita spectrum?

It turns out that Nova Scotia has BY FAR the lowest GDP per capita in Canada. The lowest in all of North America and Europe. And our GDP per capita is declining rather than rising along with our current unprecedented growth.

Nothing could be a more clear indicator that something is fundamentally wrong with Nova Scotia’s current economic strategy of growth for growth’s sake and population increase untethered from our capacity in housing, natural resources, environmental concerns, waning entrepreneurship, creative and industrial capacity, and access to capital – even our own created wealth.

What our GDP-oriented ‘growth’ ideology has brought us is an almost frictionless out-conveyor of natural and created wealth, the worst housing crisis in our history, the highest homelessness in your history,

unprecedented destruction of natural resources, an ugliness seldom seen in the history of architecture, astonishing billions in deferred repairs and maintenance at the household and public level, and an unbridled transfer of our common wealth, the things we share and value together, to a very few aggregators of capital.

Making the simple and immediate change to a GDP per capita measure of progress and prosperity in Nova Scotia would help every aspect of our society and environment, open us to new ideas for the future, and get us off the dope and empty calories of growth for growth’s sake.