The Global Boom in New Indicators

Calvert-Henderson Quality of Life Indicators in Context, originally posted at www.calvert-henderson.com, 2007

The perennial debate over whether income is a good measure of development continues. Today there is wide agreement that many other measures besides per-capita income are needed for measuring overall progress, from health and education to environmental quality as the new GlobeScan Survey in conjunction with the Eurpoean Parliament’s Beyond GDP conference, November 2007, shows (www.Globescan.com and www.beyondgdp.eu). The European Commissions’s Conference Beyond GDP in November, 2007, shows a new level of official interest. We are delighted to announce that Dr. Jochen Jesinghaus, statistician with the European Commission, has joined our Advisory Board. His ground-breaking statistical Dashboard method of displaying statistics helps achieve deeper comprehension about their crucial role in steering policy-making. Britain’s New Economics Foundation released its Happy Planet Index following all the publicity around Bhutan’s efforts to measure Gross National Happiness in that Bhuddist nation. Happiness surveys have become all the rage as I review in Chapter 1 of Ethical Markets: Growing the Green Economy (2006) from Chelsea Green Books. Todd Moss of the Center for Global Development reviewed the debate in Is Wealthier Really Healthier? (Foreign Policy, March/April 2005). The first program in the new TV series “Ethical Markets” advanced the debate in Redefining Success, airs on PBS stations covering 44 million households in the USA. (Details on all 13 shows at www.ethicalmarkets.com.) We are proud that our Calvert-Henderson indicators are now being translated into Chinese by the Chinese Acadamy of Sciences in Beijing. A delegation from the Confederation of Indian Industry visited us in March 2007 seeking our cooperation in using our indicators in India.

A 2005 study for the National Academies of Science, Beyond the Market focuses on the non-money sectors, long covered in my books. Methodologically challenged, the report’s Advisory Panel was composed solely of economists whose training produces the very myopia they were charged to overcome. Better approaches include the OECD’s social indicators in Society at a Glance (March 2005, OECD, Paris France), which surveys its 30 member industrial nations with evidence on whether they have more or less equality, cohesiveness and health – using similar indicator sets as ours at Calvert-Henderson and Revolutionary Wealth by futurists Alvin and Heidi Toffler and The Real Wealth of Nations by Riane Eisler. The Center for Disease Control and Prevention estimates that reducing US death rates from cancer by 1% would add $500 billion to the US economy in The Value of Health and Longevity (National Institutes of Health, 2006). A ground-breaking set of cultural indicators for food security, sovereignty and sustainable development was proposed in October 2006 by the International Indian Treaty Council, a broad coalition of indigenous peoples.

The Hon. Roy J. Romanow, chair of the Canadian Romanow Commission on the future of health care in Canada, launched the new Canadian Index of Wellbeing (CIW), covered in Reality Check, Issues #10. The Atkinson Charitable Foundation released the first CIW in fall 2005. For details, visit www.atkinsonfoundation.ca/ciw. Romanow keynoted teh OECD Conference on Measuring National Progress in Istanbul, July, 2007 (www.oecd.org)

The Second International Conference on Gross National Happiness, convened in Nova Scotia, Canada, June 20-24, 2005 and hosted by Canada’s Governor General Adrienne Clarkson, rated a 2,500 word story in the New York Times (Oct 9, 2005). This conference followed up the first conference on Gross National Happiness held in Bhutan, February, 2004. It is another initiative from Canada’s Reality Check, which breaks new ground in assessing the impacts of new policy proposals to create more jobs and reduce poverty gaps by eliminating overtime and shortening work weeks. (See www.gpiatlantic.org/realitycheck). Reality Check’s editor, Ron Coleman, serves on the Calvert-Henderson Advisory Board.

The Millennium Ecosystem Assessment, released in March 2005, synthesizes information from scientific literature, peer-reviewed data sets and models. This global tool incorporates knowledge held by the private sector, practitioners, local communities and indigenous peoples, concerning the state of natural systems and human well-being. These useful Reports will be published by the World Resources Institute and Island Press, Washington, DC. Synthesis Reports are downloadable from www.Millenniumassessment.org. The new Environmental Performance Index (EPI) was released in 2006 in a pilot from by Yale University, Columbia University, and the WOrld Economic Forum. Top ranked countries were New Zealand, Sweden, Finland, the Czech Republic and Britain.

Another look at quality of life on the whole planet can be found in the World Wildlife Fund’s Living Planet Report. This report uses scientific analysis to compare the Ecological Footprints of 150 nations and is now available from our Advisory Board Member Mathis Wackernagel who co-edits the report (www.footprintnetwork.org). Local quality of life was rated by The Economist‘s Intelligence Unit in a ranking of cities’ “liveability.” Surprizingly, Cleveland and Pittsburgh were rated the top two cities in the US with Vancouver, Canada the overall winner.

The breakthrough conference on quality-of-life indicators, ICONS, in Curitiba, Brasil, October 2003, which brought together over 700 statisticians, policy wonks, government officials and business leaders, yielded some important concessions from the IMF. The consensus among statisticians about the need for national accounts to include assets created by public investments was endorsed by Brasil’s finance minister in his negotiations with the IMF. The fund agreed in April 2004 that needed public investments in infrastructure could be excluded from Brasil’s calculations of its ‘primary surplus’ on a pilot project basis. This ‘backdoor’ admission of the need to include accrual accounting in GDP is a step in the right direction. But it’s high time the IMF took some leadership in requiring that a country’s investments in infrastructure assets be properly accounted for so as to offset public debt. Today, the lack of asset accounts overstates public debt. Furthermore, such public investments, beyond water treatment, public health, roads, etc. should also include investments in education. Conferences like ICONS bring quality-of-life debates to the fore, such as the different preferences of Europeans for leisure versus what they see as a “workaholic” US society. Jeremy Rifkin’s The European Dream (2004) explores these differences in cultural choices, which are ignored by traditional economic statistics.

These issues and how to reform international finance, the World Bank, and the IMF are the subject of five 26 minute TV programs in the new series “Ethical Markets.” This mini-series, “International Financial Reform,” is moderated by me and will first be aired in Brasil. Guest panelists are Kenneth Rogoff (former Chief Economist of the IMF), Sakiko Fukuda-Parr (lead author of the UN Human Development Report), and John Perkins (author of the explosive new best-seller, Confessions of an Economic HitMan Berrett-Koehler, San Francisco, 2004). These programs are being used in several business schools and can be ordered in DVD or VHS from www.ethicalmarkets.com.

The ICONS conference was preceded by a gathering of 600 business executives interested in exploring socially responsible business and investing, co-sponsored by Brasil’s Instituto Ethos de Empresas Responsibilidade Sociale, on whose international board I serve. The broader focus of both conferences on indicators measuring socially responsible companies, ethical investing and overhauling economic statistics and national accounts (GNP and GDP) brought together statisticians specializing in both macro level indicators and micro measures of urban quality of life and corporate social performance.

These back-to-back conferences drew participants from all over Latin America as well as from North America, Europe and China. Most impressive at the ICONS conference (papers at www.sustentabilidade.org.br) were the quality-of-life indicators from Brasil’s statisticians at the Brasilian Institute of Geography and Statistics (IBGE), The Research Institute of Applied Economics (IPEA), the Universities of Sao Paulo, Fundacao Dom Cabral and the Social and Economic Development Index. Many municipal research institutes also presented, including the State of Rio Grande do Sul, the State and City of Sao Paulo’s social responsibility indicators, SEADE and the Atlas ranking Quality of Life in Brasil’s cities. I presented The Calvert-Henderson Quality of Life Indicators at the opening plenary session.

Most participants, while using economic statistics, recognized the problems with macro-economic measures like GNP and GDP, which are too highly aggregated to offer useful real world detail. They “fly over” a country like a plane at 50,000 feet, so that per-capita averaged income masks poverty gaps, social exclusion and mal-distribution between urban, rural and regional populations. Even sessions organized by business groups focused on broader health, education and equity issues, as well as on “triple bottom line” (social environmental and economic) corporate accounting, socially responsible business, investing and consumerism. The Brasil Council for Sustainable Development focused on the environment and eco-efficiency.

Brasil has led in the creation of the new indicators since hosting the 1992 UN Earth Summit in Rio de Janeiro, where over 170 governments agreed on Agenda 21 to overhaul GNP/GDP by broadening its scope to account for human, social and environmental capital and costs of depletion and social disruption – “externalities” not born by the private sector and ignored by mainstream economists. Only when all these costs are “internalized” on corporate and government balance sheets, can prices reflect full costs, so as to steer societies in more optimal, healthy directions toward sustainable development and quality of life. All this new activity has been accelerated by the news of the corporate crime scandals and political corruption in the USA. Similar revelations spread to Europe in 2003. The costs and harmful effects borne by others are often ignored as “externalities” in economist-speak. Now those hidden social and environmental costs are being quantified.

The enthusiasm of participants in such conferences may be related to their former sense of isolation within traditional business and government institutions and operating under conventional economics. Fragmented approaches of individual disciplines have created a conceptual Tower of Babel, with an inability to see whole social systems now requiring integrated policies. Economists, sociologists, demographers, anthropologists, game theorists, biologists, health statisticians and ecologists all rubbed shoulders and found useful interfaces and opportunities for more trans-disciplinary cooperation.

New alliances are being forged between banks and “green” asset managers, for example, Banco REAL, Banco do Brasil and the new BOVESPA Index of superior corporate governance (which has outperformed the regular BOVESPA since its inception some 2 years ago). BOVESPA has launched a new Social Stock Exchange composed of nonprofit civic organizations and charities so that they now receive investments for social returns. Already this new market for social investors has closed budget gaps for many vital Brasilian charities. BOVESPA also has a new “green” Index of sustainable companies, similar to the Dow-Jones Sustainability Group Index, London’s FTSE 4Good, the US-based CALVIN Index and the Domini Social 400. At last, in the Nov 13 issue of Business Week, the de-bunking of the vernerable but outdated Dow Jones Average went public – pointing out that the Dow’s 12,000 figure was out of touch with the more realistic Standard and Poors 500. Since then, the Dow has reached new highs in May 2007, while many are forecasting even slower growth in the US economy.

Brasil’s new statistics include measuring its cultural assets: creativity, design, music, art and growing efforts to close its poverty gap and create a participatory democracy to include all its racially and ethnically diverse citizens. As the ICONS participants agreed, statisticians and technicians should strive to communicate their data widely – as servants to all people and the democratic process. Methodological issues: what to measure, how to measure, at what levels – from local, municipal, corporate to national and international – dominated the sessions. Values and cultural norms underlying government statistics and corporate accounting were highlighted – particularly the new “triple bottom line” reporting of corporations’ economic, social and environmental performance (www.gri.org), in which Calvert is a leader.

The Earth Institute at Columbia University, headed by Jeffrey Sachs, monitors the Millennium Development Goals for the 21st century agreed on by over 190 UN member states in 2000. Sachs picks up the issue of investments in infrastructure as the bedrock of human development. Sachs fails to call for the remedy of including asset accounts in GDP to track the value of infrastructure — but merely notes the shortfall in African countries vis-à-vis other developing countries (“Doing the Sums on Africa,” The Economist, May 22, 2004). Among the Millenium Development Goals: reducing poverty and the global gap between the world’s rich and poor; bringing better nutrition, education and health care to the world’s 2 billion deprived people – and reducing military arsenals while resolving conflicts by negotiation and peaceful means. US support for the UN rose on its continued relevance in matters of war and peace, despite cynicism over the Oil for Food scandal. The effort of Sach’s team to operationalize these Goals is summarized in his book, The End of Poverty (2005).

Some sensitivity on the part of the Bush Administration was seen in the call for faster progress and better indicators – to measure achievement toward poverty alleviation goals of the Millennium Summit. The US made commitments to the Millennium Challenge Account (MCA) providing $5 billion annually to a select group of developing countries and an additional $10 billion to combat HIV/AIDS in Africa and the Caribbean. These pledges were augmented in the G8 Summit of July 2005. The Millennium Challenge Corporation will run the MCA based on 16 quantitative indicators to measure the extent to which countries are “ruling justly, investing in their people and establishing economic freedom.” These unbundled indicators (beyond simplistic GDP-growth and ability to service external debt) include among budget deficits and trade policy, such broader indicators as immunization rates, primary-school completion rates, control of corruption and protection of civil liberties. For a deeper look at these new international aid initiatives, see David Roodman’s indicators (Ranking the Rich) ranking rich countries’ generosity in aid programs to alleviate poverty (www.cdg.org).

Greater policy focus is on the absurdity of measuring a country’s progress by growth of its per capita GDP. An example, now becoming clear to Wall Street, bond and currency markets, involves the rapid upward revaluation of Brasil’s fundamentals despite recent political scandals. Many of these still lie outside traditional macro-economic analysis: its energy independence (bountiful hydropower, solar, wind, ethanol as well as oil), millions of hectares of virgin arable land; incomparable ecological assets (rainforests, rivers, over 2,000 miles of unspoiled beaches, unique flora and fauna); a youthful population of 180 million and a robust domestic market within a land area comparable to the USA (less reliance on export-led growth). Such assets are not all accounted for in GDP, nor are public infrastructure assets (universities, hospitals, airports, rail and highways and communications networks). The USA corrected some of these shortcomings of its GDP in 1996, by accounting for such public assets as “savings” thus reducing the US deficit figure.

Although the World Bank’s Wealth Index, initiated in 1995 recommends accounting for such assets, including social capital (e.g., civic organizations, well-run cities and social services) and human capital (intellectual assets, culture) few in financial circles bother to assess or include such data on sustainability and quality of life. Another example is the Economic Report on Africa 2003, UN Economic Commission for Africa, July 2003 (http://www.uneca.org era 2003). The best performers by GDP per capita growth rates were Mozambique, Rwanda and Uganda, whose economies grew by 12%, 9.9% and 6.2% respectively. But, as pointed out (The Economist, Aug. 16, 2003, p. 68) all three economies had been ravaged by wars and despite over a decade of peace, none had regained its pre-war level of prosperity. Growth rates must be related to baselines. All three countries depend on charity. Aid accounts for 50% of Uganda’s national government budget; in Rwanda it’s 60% and Mozambique 70%. The highly-aggregated GDP measures also obscure large areas of stagnation with growth of incomes occurring largely in their capital cities with huge regional disparities in poverty-ridden rural areas. These current examples of the problems of over-averaged statistics are the reason for the unbundled systems approach of our Calvert-Henderson Quality of Life Indicators.

The US economy is still fueled by household debt, domestic and trade deficits, while headline unemployment figures omit millions of discouraged workers no longer counted among those seeking work. Growing awareness of the need to “unpack” such macro-economic indicators led to many media stories on the “hidden unemployment” of those discouraged job seekers, under-employed part-timers, structurally-unemployed youth and minorities (click on the Employment Indicator). Another anomaly is that the spurt in hourly productivity (up 1.7% in Q1, 2007) translates into fewer jobs as companies strive for efficiency and profits by downsizing their workforces. The10-year study by The Russell Sage and Rockefeller Foundations of the changing structure of US employment and declining average wages pointed to some startling conclusions. Almost one American worker in five reported having been paid less than $8 per hour in 2001. Furthermore, the median American worker’s real hourly wages rose only 7% between 1973 and 2001 (click on Income Indicator) according to The State of Working America, published by the Economic Policy Institute — EPI President, Lawrence Mishel serves on our Advisory Board (www.epi.org). The issues of the working poor led Congress to pass legislation to raise the minimum wage to $7.50 following the initiatives in many states.

Why are returns to capital outpacing returns to employees? Why do ordinary American workers get to keep less of what they produce than ordinary workers in other rich countries? The Russell Sage – Rockefeller Foundations’ reports on why the gap between rich and poor is wider than in most other rich democracies: “its politics, stupid”! These differences in income distribution seem to be traceable to differences in constitutional arrangements, electoral systems and economic institutions. These differences, in turn, affect the political balance, the level of spending on the welfare state and a wide range of other economic policies. Economic inequality is less pronounced in countries that favor multi-party systems and proportional representation (rather than a two-party system) and produce more equal economic outcomes. A summary of this ground-breaking research was published in The American Prospect, January 2004 (www.prospect.org).

Journals cover the growing debate about quality of life in both the USA and Canada. We are proud to have helped lead this debate. In the USA, a member of our Advisory Board, Jeff Madrick, editor of the journal Challenge and regular columnist for the New York Times, edits Indicators: The Journal of Social Health to report on those who are measuring quality of life. Madrick noted in his inaugural Letter from the Editor “For too long, the nation’s gross domestic product (GDP) has borne, almost alone it seems, the responsibility of measuring how well-off we are…But consider what GNP does not measure: the distribution of income, the hours people must work, household labor, the degradation of the environment, the use of leisure time…. It tells us little about education, healthcare or job satisfaction…nor does it distinguish between kinds of investment in the future of our economy.”

These are all issues covered by the Calvert-Henderson Quality of Life Indicators since our inception (see our desk reference manual published in January 2000, available from the Calvert Group, PO Box 30348, Bethesda, MD 20814 or at Amazon.com). In my article for Madrick’s Challenge (December 1996) What’s New in the Great Debate About Wealth and Progress, I made the same points. In Canada, Ron Coleman’s journal, Reality Check, covers this burgeoning new debate. Recent issues contain in-depth examinations of how Canada accounts for its wealth of forest resources and how more accurate valuation of these ecological assets could protect them from over-exploitation; how conventional economic measures distort our sense of who’s well-off and who’s not, as well as the Canadian government’s $9 million commitment to develop indicators of environmentally-sustainable development (http://www.nrtee-trnee.ca). Reality Check illustrated the importance of more comprehensive macro indicators, with examples of how measuring the social costs of technological choices can led to better national policies in Canada’s transportation and food systems (www.gpiatlantic.org/realitycheck).

Other initiatives include early stage work on Quality of Life Indicators for Mexico City and the City of Shanghai, China; a Local Sustainability Certification initiative by the Institute for Political Ecology, Santiago, Chile (www.sustainabilitycertification.org). A set of indicators, Social Watch 2003 was released at the World Social Forum in Brasil, a Citizens Report on the Quality of Life in the World. This is available on a CD (www.socialwatch.org). Japan for Sustainability is a non-profit platform for disseminating information on Japan’s progress toward sustainability (www.japanfs.org). The European Commissions Joint Research Center is continuing work on its Dashboard Tool for Measuring Policy Performance, designed by the Consultative Group on Sustainable Development Indices (CGSDI). Their Policy Performance Index (PPI) evaluates governmental policy and performance on Economy, Environment and Social Care. Contact Jochen Jesinghaus for updates at [email protected]. The contrasting paradigms have crystallized between the Davos-based World Economic Forum vis-à-vis the World Social Forum in Porto Alegre, Brasil. http://www.forumsocialmundial.org.br/home.asp.

For an overview of these “life satisfaction” methodological approaches, see Life Satisfaction: the state of knowledge and implications for government, by Nick Donovan and David Halpern, with Richard Sargent, commissioned by the cabinet of Office Strategy Unit of the British government. The group surveyed national and cultural differences and trends. For example in Denmark the percentage of people who were “very satisfied” with the quality of lives rose from 51% in 1973 to 64% in 2001. By contrast, in Belgium during the same period, the “very satisfieds” fell from 44% to 18%. The study ranges over genetic and demographic factors to work, unemployment, inequality (both caused serious loss of satisfaction), to health (a crucial factor), and education, which had very little effect. Social life and leisure were key contributors to a satisfied life – as our Calvert-Henderson Re-Creation Indicator also shows. Relationships with spouses, family and community were also key, as well as freedom and democracy (for details, contact [email protected]).

As we now see, social, environmental, and ethical auditing and the “triple bottom line” of the Global Reporting Initiative (GRI) are now matched by a host of new macro-level and global indicators and indexes. Our Calvert-Henderson Quality of Life Indicators were introduced to the professional statistical community in 2000, developed as a new tool for assessing national trends in the USA. Since this release of our technical reference manual in January 2000, our Quality of Life Indicators have been widely and favorably reviewed (see “Endorsements“). They have been presented at professional conferences in Canada, Mexico, Brasil, Chile, Japan, Australia, New Zealand, China, and Venezuela, as well as at United Nations conferences and in Germany, Britain, Sweden, Poland, Czech Republic and many other European countries. During my visits to Brasil, I have presented the Calvert-Henderson Indicators before many government, business and civic society organizations as well as on a half-hour program on TV Cultura (videocassettes available upon request; see www.hazelhenderson.com). Our Indicators serve as a backdrop and thematic underpinning of the financial lifestyle TV series Ethical Markets airing in the USA on PBS.

Both macro and micro sets of social and environmental indicators are proliferating; for example, the “Social Health of the States” released annually by Marc J. Miringoff (Miringoff 2001) of Fordham University’s Institute for Innovation in Social Policy (also a former consultant to the Calvert-Henderson Quality of Life Indicators). Examples of environmental and sustainability indicators abound in many states, from Maine to Oregon. Other indicators follow the pioneering work of the annual United Nations Human Development Index, launched in 1990. They include “The Well-being of Nations” compiled across 180 countries by Robert Prescott-Allen (Prescott-Allen 2001). All these attest to the growing importance of measuring both corporate and governments’ social performance and societies’ overall quality of life. In 2000, the Calvert Group launched the Calvert Social Index of around 600 socially responsible corporations. The Dow Jones Sustainability Group Index launched in 1999 and in 2001, London’s FTSE100 launched its own FTSE4 Good, and Brasil’s stock exchange, BOVESPA, launched its New Market Index of socially-responsible companies, which has out-performed its main index by a steady 1% ever since.

The post-Enron climate of questioning financial markets, auditing standards and political corruption has accelerated these trends toward greater transparency and accountability. Canada has become a leader in quality of life and sustainability indicators and we have developed a working relationship with many of our Canadian colleagues at the National Roundtable on the Economy and the Environment (www.nrtee-trnee.ca) and the Canadian Policy Research Network Ottawa (www.cprn.org). The Toronto Globe and Mail reported, on January 7, 2002, the North American Commission for Environmental Cooperation’s latest finding that: “The health of [the North American] environment that sustains 394 million people and an economy worth US $9 trillion is at risk.” The Commission, set up by the NAFTA partners, the USA, Canada and Mexico, assesses the sustainability of these three economies.

Many governments have joined in the move toward sustainability and quality of life concerns accelerated by the Beyond GDP conference of the 27 countires of the Eurpoean Union in November, 2007. Following the Agenda 21 Agreement they signed at the Earth Summit in 1992 in Rio de Janeiro, 170 countries promised to overhaul their national accounts, specifically Gross National Product (GNP) and its narrower version Gross Domestic Product (GDP). These were to be expanded to account for environmental assets, the costs of depletion and pollution, as well as social and human “capital” (social cohesion, community and family values, healthy, well-educated people). As this evolution of the field of social and environmental indicators continues, many are designated as indicators of sustainable development, defined in the Brundtland Commission report, Our Common Future, as “development which meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED 1987). Increasingly, global civic watchdog organizations from Amnesty International and Transparency International (which targets corruption) to Greenpeace assess governmental responsibility for social and environmental as well as economic performance.

Civic groups worldwide since 1992 have created The Earth Charter (www.earthcharter.org), now recognized as a universal declaration of human responsibilities, which complements the Universal Declaration of Human Rights. The sixteen principles of The Earth Charter have been adopted by many cities worldwide. As an early supporter of The Earth Charter, I am proud that our partner, The Calvert Group, was the first major company to endorse the Charter. A set of Earth Charter Indicators is being initiated and I am happy to be serving on its Advisory Board. The indicators project was launched in December 2003 by the Earth Charter Action Partnership to assist cities around the world that support the Earth Charter in clarifying priorities, goals, targets and measuring progress toward Earth Charter principles (www. EarthCharter.org). The World Resources Institute, which had developed ECAST (the Earth Charter Action Support Tool) will coordinate the project with an Advisory Committee on which I am pleased to serve.

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