Vermont two years ago became the first state in the US to pass a law introducing a new metric for measuring economic performance and success.
The Genuine Progress Indicator (GPI) offers an alternative to the Gross Domestic Product (GDP), which has been used at national and state levels since Simon Kuznets presented it to Congress in 1934, despite his warning of the oversimplifications embedded in the metric.
Systems thinker Donella Meadows, the founder of the Vermont-based organisation that I now direct, cut to the heart of GDP’s limitations when she wrote: “If you define the goal of society as GDP, that society will do its best to produce GDP. It will not produce welfare, equity, justice or efficiency unless you define a goal and regularly measure and report the state of welfare, equity, justice, or efficiency.”
So it should come as no surprise that Vermont has been joined by 19 other US states and dozens of nations in working on “beyond GDP” metrics.
Maryland’s commitment to the GPI came thanks to an act championed by governor Martin O’Malley. In Oregon, governor John Kitzhaber and first lady Cylvia Hayes are fervent advocates. Washington State, Colorado, and Hawaii are following Vermont’s example.
To get a feel for how GPI differs from GDP, imagine two heating-oil trucks leaving from the same utility company: one safely completes its deliveries and the other has a major oil spill on the way to its first customer.
The truck that spilled its oil would make GDP go up because of all the spending to clean up the mess. By contrast, both oil trucks would make the GPI go down: remediation spending would be counted as a negative, and so would the cost to society of emissions from heating with oil and the costs of any long-term damage to aquifers and streams.
Vermont offers an excellent example of how GPI and GDP differ in practice. Prior to 1970 GPI used to be slightly higher than the GDP number. Then, the two indices began to diverge, with GPI holding steady while GDP continued to increase. In 2011, Vermont’s GPI per capita was 40% less than state GDP due to rising income inequality and a strong dependence on fossil fuels.
What would make the GPI go up? Getting more energy from renewables; increased energy efficiency; reducing the income gap; putting more reliable, durable products on the market (have you heard of planned obsolescence?); volunteering more for your community; preserving wetlands, forests, and farmland; shorter commutes and transport routes. In fact, there are 26 ways the GPI can go up, all measured in dollars that boil down to a single number.
The next question for these states is how to use the GPI to inform policy and economic development strategies.
Jon Erickson, professor of ecological economics at University of Vermont, says that because of its comprehensive nature, GPI can help agencies work together – as opposed to pulling in different directions – and can represent scenarios that show impacts on multiple dimensions.
The first test in applying GPI comes with the state’s recently released first five-year economic development plan. Ken Jones, economic analyst at Vermont’s Agency of Commerce and Community Development and lead author of the strategic document, ties the state’s economic future to successfully growing the GPI over the next five years.
“The overarching goal for this Comprehensive Economic Development Strategy is to increase the Genuine Progress Indicator by 5% over the national baseline by 2020,” states the document.
The core strategy will be to intentionally focus growth on sectors of the economy that provide local jobs but don’t deplete natural assets or the social fabric of the state – sectors like arts and culture, biotechnology, clean energy, education, financial services, food and forest products, and healthcare. With a meagre 4% of its labour force in non-farm green jobs, Vermont is nevertheless leading the nation in exploring this untapped growth potential.
Even while a circle of experts and decision-makers are putting legs on the GPI to make it an effective planning instrument, most legislators, the broader public, and Vermont’s strong non-profit sector are not fully aware of the indicator’s potential.
The route to accelerating Vermont toward genuine progress is uncharted. It starts with understanding why this new measure is something to celebrate. It continues into understanding what it means for people to hold their elected representatives accountable according to these new goals. It poses questions about which coalitions should be built and who should be at the table for discussions.
It is complex work, but we can’t afford to rely on simplistic metrics any longer. More importantly, we can’t ignore the power of networks across sectors of society, something that Vermont, with its small size and face-to-face democracy, has a natural predisposition towards.
- This article was amended on 24 September to add the correct name of Maryland’s governor which is Martin O’Malley, not Joseph O’Malley as originally written.
Marta Ceroni is the executive director of the Donella Meadows Institute, an education non-profit based in Norwich, Vermont.
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