Measuring Real Wealth: Beyond GDP by Riane Eisler

The U.S. Commerce Department recently announced a growth in Gross Domestic Product of 5.7 % for the last quarter of 2009 — the fastest growth in six years. This sounds like great news. But it's only a small part of the economic story, which is why GDP is so misleading.

Besides the fact that GDP doesn't measure unemployment or other dire realities facing businesses, workers, and families in the U.S. today, GDP fails to measure what really counts. It tells us nothing about the degree to which a nation invests in its real wealth: people and nature.

Investing in what economists call "high-quality human capital" is essential as we shift to the post-industrial knowledge/service economy. Yet here are some statistics, from even before the "Great Recession," showing how the U.S. has actually been neglecting its most important resource: its people, starting in childhood.

• Infant mortality: The United States ranks 44th, behind every industrialized nation, and behind much poorer nations, according to the 2008 CIA Fact Book.
• Childhood Development: The Save the Children "report card" comparing 25 wealthy nations on 10 key benchmarks of early childhood development shows that Sweden meets all ten, Finland, Denmark, France, and Norway meet eight, and the United States only meets three.
• Child and overall poverty levels: The U.S. had the highest child poverty rate (21.9%) of industrial nations and the highest overall poverty rate (17.0%) of the 17 OECD countries, according to the International Comparisons chapter of The State of Working America 2004/2005. Finland (5.4%), Norway (6.4%), and Sweden (6.5%) had the lowest overall poverty rates.
• Maternal mortality: The United States ranks 41st according to a UN analysis of 171 countries.

None of this information is shown by GDP, or even by the World Economic Forum's Global Competitiveness index. Nor does GDP reflect whether or not a nation is investing in caring for nature – even in face of mounting environmental threats

Because government and business leaders urgently need more accurate and inclusive economic measures, the Center for Partnership Studies (CPS) has commissioned the Urban Institute in Washington, D.C., to survey the current movement toward measures that go beyond GDP – from the earlier United Nations Development reports and the recent Sarkozy report by noted economists such as Joseph Stiglitz and Amartya Sen to less – publicized environmental, gender, and children’s well-being indicators – and to make specific recommendations.

One of the concerns of CPS is to ensure that new economic indicators are inclusive, and particularly that the majority – women and children – are not again forgotten. This is not only for their sake, but because data about children and women is essential for any accurate assessment of global economic and social conditions. As was recently posted on this blog, "A healthy global economy needs a strong societal foundation and this cannot be achieved without the contributions and participation of 51 percent of the global population."

There is strong evidence of this. Studies (including the CPS "Women, Men, and the Global Quality of Life” report and the World Economic Forum's Global Gender Gap reports) show a strong correlation between a nation’s general quality of life and the status of women. Similarly, Canadian and other studies show that national investment in children, such as in high-quality childhood education, is key to success in the post-industrial economy.

I urge all policy makers and developers of new economic measurements to consider these correlations. Only by taking them into account will business and government leaders have the inclusive and accurate economic indicators they need to develop more effective and humane economic and social policies.

Riane Eisler wrote this post as a guest of The She Change. She is a systems scientist and cultural historian, president of the Center for Partnership Studies, and author of the international bestsellers The Chalice and the Blade and The Real Wealth of Nations.