Mapping the Transition from GDP-Growth to Rising Quality of Life, August 2001

Forthcoming in NIKKEI ECOLOGY

©  Hazel Henderson, August 2001
(word count 1,327)

Mapping the Transition from
GDP-growth To Rising Quality of Life

By

Hazel Henderson

Economies are living systems – not fully understood by the economics profession as I pointed out in my Entropy Economics (Diamond, Tokyo, 1983) and Paradigms in Progress (Shin Hyroyon, Tokyo 1998). Economies are always embedded in societies and their different “cultural DNA-codes:” i.e., their value systems, goals and worldviews. These cultural DNA-codes determine the laws and social customs, which provide the framework of rules by which each economy is designed. Each country uses different mixtures of markets, governmental public sectors and voluntary civic sectors. Voters and governments set the rules for where and how markets operate. Without such rules, markets can slide into the “mafia capitalism” we see in Russia.

Most societies value certain jobs as more important than others. Priests, soldiers, farmers, factory workers, nurses, doctors, office workers have differing status and pay scales in different countries. In the USA, there are 40 lawyers for every one in Japan. All these jobs in most societies are paid more than housework, childcare and parenting. Yet these mostly unpaid jobs, together with volunteering and community service provide the “social glue” that holds societies together harmoniously. GDP ignores this “Love Economy” precisely because it is unpaid – yet even in industrial societies, this unpaid, cooperative sector accounts for some 50% of all productive work. In developing countries, which are more traditional and rural, these cooperative, non-money sectors are larger – sometimes 65% of all productive activities. In 1995, the UN Human Development Report estimated world unpaid production at $16 trillion ($11 trillion by women and $5 trillion by men) which was simply missing from global GDP of $40 trillion.

No transition from the GDP-growth trap to a quality-of-life focused, mature economy is possible without unraveling all the assumptions and value-judgments underlying conventional economics and the “GDP-growth as progress” model. In a nutshell, its underlying logic is that of the cancer cell – which keeps growing parasitically on its human host. Remember that GDP values at zero the environment, social cohesion, healthy citizens and cultural values. GDP treats money spent on cleaning up pollution and hospital costs of traffic accident victims as more “production.”

So to correct GDP, we must begin sorting out the “goods” from the “bads” and deduct all the social and environmental costs of production to calculate the “net” GDP. I, Herman Daly, Lester Brown and many other systems thinkers have been calling for these changes for decades. Likewise, companies need to internalize on their balance sheets, all the social and environmental costs of their products. This way, consumers will pay these full costs of production in the price of products. This, in turn, will mean re-designing their product lines to minimize pollution, waste and social harm. Products will become safer, cleaner and “greener” while some goods will disappear.

At Kyoto in 1997, the member countries of the UN began such a process to deal with rising CO2 levels and climate change – by internalizing the cost of carbon pollution via taxing or capping and trading carbon emissions. Only the USA refused to abide by the Kyoto Protocols. But the countries that signed, including Japan and the European Union, will use this global change of the rules of markets to jump-start their economies’ transitions. The Kyoto Protocols provide a level playing field that will foster this transition from GDP-growth to more highly-evolved economies with ever more efficient, cleaner, greener productive companies, infrastructure and sustainable community development.

Meanwhile, in the USA, the obsolete fossil-fuel and nuclear powered sectors of the “old economy”: autos, steel, construction, chemicals and the military-industrial companies are all still subsidized by taxpayers. They continue spending millions advertising and lobbying against the Kyoto Protocols. All living economies gradually change and evolve to meet new needs with new technologies. But if peoples’ votes don’t count or elections and democracies are distorted by money – a living economy can be weakened by its inability to throw off the old industries, which become like cancers.

Whole new industries based on evolving technologies are blocked: solar, wind, ocean and biomass energy, electric hybrid and fuel cell cars, better batteries, flywheels and energy storage, decentralized on-site power co-generation, electric bikes and mass-transit – along with recycling, re-use and re-manufacturing. Millions of new jobs will be created by re-designing our cities and transport systems for greater diversity and access, safe, car-free pedestrian and bike travel and in shifting from expensive, wasteful toxic agriculture to safer, organic farming, not for export, but local markets.

As we expose and clean up corruption in politics – by reforming campaign financing of politicians by the “old economy” lobbies, subsidies can be shifted to the new industries and the entrepreneurs developing these new technologies. Using public funds to innovate and jump-start clean, green companies is better than printing money or urging satiated consumers to buy more products they don’t need or want. To complete the redesign, economies will fully embrace the new super-efficient technologies of production. Cheap energy and tax-supported roads, ports, air freight, etc., still subsidize world trade. When products and shipping are fully priced, we find that local production of goods for domestic markets is more efficient than much global trade. Information, rather than goods, is more efficiently traded. We should ship recipes not cakes – including licenses for “green” technologies and services.

Systems designers from many disciplines will help create the new social infrastructure and economic mechanisms to distribute the new productivity to all citizens. Key proposals mentioned earlier are geared to keep adequate purchasing power circulating among those with basic needs still un-met. These include the unemployed, welfare recipients, disabled, and the elderly with inadequate pensions, as well as students needing assistance to complete college. Instead of many government agencies now dispensing welfare checks, food stamps, student loans, and unemployment and pension checks – the tax administration can also disburse minimum guaranteed incomes to all citizens automatically.

Able-bodied recipients who live frugally will be able to pursue public service and community volunteer work, write novels, make art, music and contribute to culture and society in many ways. Many will also take jobs as well – or use their citizen income to start small businesses. Such “citizen wage” and service incomes are a far better way of stimulating productive economies than across-the-board tax cuts, expanding the money supply (by printing money) or continue subsidies to “old economy” companies or contracting new public works out to construction firms.

Once deflation is checked with the extra “citizen wage” purchasing power, people will see that prices will not fall further and may rise due to the extra demand. Then “old economy” subsidies can safely be withdrawn without jeopardizing the security of workers, even though layoffs must occur in the old industries serving saturated markets. All citizens will be cushioned and with severance pay and retraining, many can move to the emerging sectors, which will be jump-started by the shifting of subsidies to help them grow. Governments will also need to shift from promoting resource-extraction, exports, advertising, planned obsolescence, waste and pollution to taxing these unsustainable activities. These tax revenues will help balance budgets.

The GDP can also be over-hauled to reflect the shift from “old economy” heavy industries and goods towards information-age services and building the voluntary care, local community development. The Quality-of-Life Indicators can be launched to complement the re-tooled GDP. These quality-of-life aspects will be measured using many disciplines and metrics – beyond money-coefficients: environment, energy-efficiency, education, health, human rights, public safety, shelter, national security and recreation/cultural progress.

Yes, all these wrenching changes, many of them about-face – will cause pain and a period of rolling readjustment. Mr. Koizumi should be asked what kind of pain and restructuring he proposes – toward what bold vision for Japan’s future. Citizens and mass media will focus more on the Quality-of-Life Indicators as they begin to advance. The GDP will reflect not growth but longer-term economic performance. My friends say, “We Japanese are not economic animals,” and any visitor to Japan knows this is true. Japanese traditional wisdom, frugality, civility and common sense can become a new model for the world.

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HAZEL HENDERSON, author, futurist and consultant on sustainable development.  Her latest book is Beyond Globalization: Shaping a Sustainable Global Economy. www.hazelhenderson.com.  Henderson’s Quality of Life Indicators, partnered with the US based Calvert Group of socially-responsible mutual funds are at www.calvert-henderson.com.

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