One of the striking features of politics in many countries now is the way voting outcomes and opinion polls reflect a widespread sense of discontent. Part of that alienation is economic: the fact that growth in Gross Domestic Product (GDP) reflects improving living standards for some, but not for many. Yet politicians still use ‘GDP’ as a mantra to justify their preferred policies, and the quarterly growth figures still feature prominently in the news.
GDP has focused the post-war western economies (and others) on growth in the consumption of goods and services from the current use of resources. The future has zero statistical weight. GDP figures have also ignored individuals, and geography, meaning many people and places have been invisible in policy debates. The innovations in the structure of the economy, involving intangible assets, data, and revolutionary changes in production, have been invisible too. What the state does not see, whatever is outside this narrow statistical lens, does not have any weight in policy making.
We are proposing a different approach to measuring the economy, in two stages.
The first involves some amendments to GDP: accounting properly for intangibles; removing unproductive financial investment; and adjusting for income distribution. These alone would make GDP a better measure of economic welfare.
The second stage is an alternative measurement framework based on the ‘wealth economy’ – on access to the range of economic assets people need to fulfil their economic potential and lead a meaningful life as they conceive it. This ambitious framework requires measurement of access to six types of economic assets that add up to what is known as comprehensive wealth:
- Physical assets and produced capital, including access to infrastructure, and to new technologies
- Net financial capital
- Natural capital, the resources and services provided by nature
- Intangible assets such as intellectual property and data
- Human capital, the accumulated skills, and the physical and mental health, of individuals
- Social and institutional capital