Infrastructure, Climate Change and the Economy: Part 3 - Measuring GDP vs GPI

February 11, 2011: Early last year, Maryland Governor Martin O'Malley announced new plans for a state-run program which helps policy makers and citizens accurately measure Maryland's standard of living. The Genuine Progress Indicator, an online tool, uses the health of the environment and society as indicators with traditional economic calculations to find an overall grade. "Just as the elements of our natural world must be balanced to ensure a healthy ecosystem," O'Mally said, "so too must be the elements of how we judge our success as a State. A strong economy, a clean environment and a healthy citizenry go hand in hand; none can be a true measure of success without supporting the other two."

The idea is not new. In a 1968 speech given at the University of Kansas, Robert Kennedy outlined the ways in which using GDP as the sole indicator of success had its shortcomings. "The gross national product," Kennedy said, "measures everything ... except that which makes life worthwhile."

And back in 2009, the New York Times reported about a European Union project aimed at taking steps to monitor environmental stress. Similarly, and more recently, India announced its own plans to take into consideration the environment when measuring its GDP.

Basically, proponents say, looking at the amount of cars manufactured, or the amount of paper made from cutting trees down, or the production of pharmaceuticals for hospitals, does not take into account the environmental stress those activities cause. Deforestation, or the health of the water, or the purity of the air affect populations, agriculture and infrastructure and that stresses to the environment are costs then pushed onto societies who have to pay for them, thus reducing actual economic growth. Additionally, mismanagement of environmental resources leads to increased stresses, a lack of resources, and health concerns.

"If we are reporting GDP growth of 8 percent a year," Indian Environment Minister Jairam Ramesh said during a conference in New Delhi, "actual GDP growth that takes into account environmental costs may be 2.5 percentage points lower."

At the Gund Institute for Ecological Economics at the University of Vermont, several GPI measures have been released. Focusing on Northeast Ohio, Baltimore, Northern Vermont and Vermont, Chittenden County and Burlington, the GPI measurements were taken to represent roughly 50 years of growth.

In Ohio for instance, out of the 17 counties measured, per capita GPI "was greatest in suburban counties and lowest in urban areas. These trends are largely driven by gains in personal consumption relative to rising environmental, social and economic costs. Important costs include those of income inequality, climate change, nonrenewable resource depletion, and consumer durables." While in Baltimore, a generally positive GPI growth. However some variables "such as the cost of crime, the cost of underemployment, and the loss of leisure time" added to mixed results due to environmental health.

Currently, aside from Vermont, Minnesota, Ohio and Utah have GPI reports.

"The GPI will help ensure that our economic growth will not come at the cost of our natural resources, and that they both support our progress toward a sustainable future and a better quality of life for all Maryland families," O'Malley said.