Genuine Progress Indicator

The Genuine Progress Indicator (GPI ) (in German about Genuine Progress Indicator ) is an economic indicator that replacing gross domestic product (GDP) and in its place a " truer " to allow assessment of the performance of economies. He emerged from the former Index of Sustainable Economic Welfare ( ISEW ).

The GPI measures whether the economic growth of a country and the associated increased production of goods and services actually leads to increased prosperity or well-being. The difference between the GDP and the GPI can be the difference between the gross and compare the net balance a business, with only the latter for the future viability of a company is crucial. Accordingly, the growth of the GPI is zero when the measured growth of GDP has been generated by open or hidden costs such as environmental damage, crime or declining health.

Numerous highly developed countries (especially the EU and Canada States) are trying to develop for several years common criteria for the identification of a comparable and objective GPI. The GPI can not therefore be regarded as a firmly defined and generally accepted index for measuring wealth. He is rather an attempt to overcome the weaknesses of GDP and currently still subject to regular changes.

Motivation for creating the GPI

In economics, progress is usually measured in monetary value. GDP measures all produced values ​​and thus represents the sum total of a country's economy dar. Under these conditions also harm " values ​​" subsumes, ie car accidents, tanker accidents or deaths may increase the GDP.

Even its inventor indicate that GDP has been in no way intended as an indicator of well-being. It was not planned to use its values ​​as an argument for or against particular policies, as it has now become common.

The GPI, however, includes the availability of ecosystem services and their damage by human activities. This outlined the GPI a broader idea of ​​progress, and he also refers to the sustainability of a with. The harvest of agricultural products, for example, achieves a higher GPI value when the water required is taken from the naturally occurring replenishment of ground water or rivers, but a significantly lower when to irrigate non-renewable, fossil water is pumped from aquifers. Is the harvesting of the same amount, the difference between the two methods, however, has no effect on GDP.

Some economists, including Herman Daly, John B. Cobb and Philip Lawn assume that the growth of an economy both benefits and costs through expanded production of goods and services - and not only benefits such as GDP suggests. In some situations damage the advanced production and other market activities, health, culture and welfare, which will often ignored by economists. In particular, use is made of this on the "frontier hypothesis " (threshold hypothesis ) by Manfred Max - Neef, which assumed that after a certain threshold in a macroeconomic system of benefits additionally generated is outweighed by the resulting damage.

Philip Lawn has developed into a "genuine progress indicator " a theoretical framework for determining the "cost" of economic activities and their relevant compared to their " benefits ". This is to be seen whether the economic development taking place to improve the lives of people or rather difficult. Lawns model suggests that the costs of economic activity determine the following potentially harmful elements:

• Resource Depletion
• Crime
• Ozone depletion
• Crumbling Families
• Air, water and noise pollution
• Loss of agricultural land
• Loss of wetlands

(Source: Lawn 2003, p 108, Table 1)

Theoretical Foundation of the GPI

The need for a genuine progress indicator, the pre-loaded indicators should replace GDP as was demonstrated in a study of uneconomic growth in the 1980s by Marilyn Waring, the biases in the UN system of national statistical data had been investigated.

In the early 1990s, a consensus had emerged in development theory and ecological economics, according to which a growing amount of money actually goes hand in hand with decreasing well-being. Essential natural and social services were paid in cash, which could expand the economy, but the quality of life deteriorated.

The issue remains controversial, especially because of neo-classical economists, GDP represents an ideal indicator of economic progress. For this, it is initially not a problem when rising health costs or the need for bottled water expensive to buy, leading to an increase in GDP. The GPI, however, would identify both as a problem, not as progress.

Results

At least eleven countries (including Germany, England, Austria and Sweden) have calculated their wealth according to provisional GPI methods new. The data for the European countries and the USA show that the development of prosperity remained, especially in the last decades significantly behind the development of GDP. In some countries GPI calculations even suggest a significant decline in prosperity. While GDP for the United States suggests a doubling of wealth in the period 1950-1995, the GPI shows particularly in the period 1975 to 1995 a sharp decline of 45 percent. The prosperity of Chile stagnated during the same period, according to the very similar calculated Index of Sustainable Economic Welfare ( ISEW ). Austria, Germany, Italy, the Netherlands, Sweden and Australia could, however, reported a gain in prosperity, although this relatively modest fails in comparison to GDP growth.

The relatively large increase in the GPI of less developed countries is consistent with the thesis of the Club of Rome, which many highly developed countries have encountered already at " the limits to growth ". The Club of Rome supports the development of the GPI.

Further development of the EU

In November 2007, the European Commission organized together with the European Parliament, the Club of Rome, OECD and WWF under the slogan " Beyond GDP" an international conference to work out with the aim of the most appropriate indicators to measure the wealth. Closing the conference promised the Commissioner for the Environment Stavros Dimas, the development of a sustainability score boards, and announced further steps. On 20 August 2009 the EU Commission published under the title "GDP and beyond: Measuring progress in a changing world ', a strategy paper in which they " five actions to better measure progress " suggests.

The five areas of activity include:

As a result, more than 20 indicators were presented - including the GPI - that could be incorporated in the new welfare indicator.