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The GPI Act with Ken Pentel
Suzoku Oshima and Ivy Hung (3/11/22)
Ivy Hung: Could you first do a quick introduction of yourself and the work you've done in the past?
Ken Pentel: Yes, my name is Ken Pentel. I am a director and founder of the Ecology Democracy Network. I've been active in organizing since the mid-1980s. In 1986, I joined Greenpeace here in Minnesota, and became an all-purpose organizer on a variety of issues. I worked 11 years with Greenpeace and then transitioned to the Green Party for about 12 years.
Then, in 2008 I left the Green Party and I started my own organization, called the Ecology Democracy Network. I decided to focus the network on structural change in the economy, the way we pick representation, and who influences our government and society, all focused on reversing ecological overshoot on Earth. Moving from a human-centered to an ecological point of view of the world was one of the main goals of the Network.
What I do now is I basically use the Network as a laboratory to develop a formula to reverse ecological overshoot. And the most important thing is that people, who want transformation towards authentic sustainability, move towards economic balance, gender balance, and things of that sort need to recognize the value in some of the Network ideas. So that's the gist of what I do.
Ivy Hung: All very impressive, thank you for all your work throughout these past decades. Then, moving on, could you explain what exactly the genuine progress indicator is?
Ken Pentel: The Genuine Progress Indicator (GPI) emerged as an alternative to the Gross Domestic Product (GDP). The GPI is a triple bottom line measurement, with social, economic and environmental indicators. It’s a collection of data points, measurements that lead to a composite indicator like the GDP.
The GDP is the most powerful economic signal on earth. It sets pricing, interest rates and budgeting, and if wea very inaccurate measurement of our overall well-being.
The GPI is more holistic, meets scale, is well vetted, and it's a far more accurate assessment of the overall well-being of the biosphere, as well as our social and economic condition. Generally the GPI is considered to be the most scientifically vetted alternative to the GDP on Earth.
Ivy Hung: Can you delve deeper between the difference of the gross domestic product and the genuine progress indicator?
Ken Pentel: Initially, the GDP was devised in 1934 to measure the overall income of the national economy during the Depression and wartime eras. Then after WWII, there was a gathering of the Allied Nations at Bretton Woods in 1944, where they established the United Nations, the World Bank, the International Monetary Fund, and the framework for trade agreements.
At that time, they said the GDP would be used to measure a nation’s economic health, and it was supposed to be an indicator of the economic strength of a society. As it developed over time it became more and more powerful - it established pricing, interest rates, and budgeting. In the US, if there are two negative quarters of GDP in a row, it is considered a benchmark for a recession. So, it’s a growth imperative. And as you know we can’t infinitely grow on finite planet.
The GDP has value, so I don't want to say to get rid of it. It has a value of showing a monetary footprint within a domestic economy, and this makes it useful for that purpose. But it should not be the global signal for economic strength or weakness that now 200 nation-states use to calculate their national income. From my point of view, and from many others, including Simon Kutznet’s, one of the people who devised it, it is an inaccurate measure of economic well-being for society.
Around in the middle part of the last century, alternatives started to emerge to the Gross Domestic Product, and one of them was the Genuine Progress Indicator, which emerged around 1995. From my point of view, the GPI is a piece of the Ecology Democracy Network formula to reverse ecological overshoot. It's not the answer, but it is a far better than the GDP. We are not looking for perfection; we're just looking for more accurate way to measure the economy. Even an imperfect GPI is far better than a perfect GDP.
Let's take one social measurement. The United Nations identifies about 53% of the world's work right now as household work. People who take care of a home, take care of children and the elderly and their animals, they clean, they shop, they cook, and so on and so forth. In the GDP, that activity doesn't show up, because no money has been exchanged. With the Genuine Progress Indicator, we'd put a column in the State, national and global spreadsheet that would show the value of somebody who takes care of a home. Because, everyone knows that household work is essential for maintaining healthy families, and communities, and so the Genuine Progress Indicator recognizes this as valuable.
I should mention that these are all intersecting points with other movements on Earth. So when I talk about home care, I’m talking about people who deal with elder care, childcare, you know, all the other activities that are associated with taking care of a home. Also, it deals with gender issues; according to the United Nations women are doing about 60 to 70 percent of the world’s work among human population right now. This is essential to understand because gender balance is part of community stability at a variety of levels, such as; population size stabilizes when women have health care, housing and education.
And once a policymaker receives a spreadsheet that shows the value of household care, then that paints a different picture for them when they move forward with policy. Now, we could put forward a social pension that would invest in those who take care of the home. That's one of the benefits in shifting from the GDP to the GPI, which puts a value on somebody who takes care of a home. This would also be endemic with volunteerism as well. Policymakers are not getting an accurate picture when they get a spreadsheet on the value of volunteer work in our society. The Genuine Progress Indicator would integrate that into the accounting of the planet, the nation, the city, wherever you’re living.
Another example of the benefits would be regarding one of the major concerns on Earth and one of the destabilizing effects on the planet, income inequality. Unlike the GPI the GDP doesn't care about allocation of resources. For example, the GPI would measure income inequality using marginal utility. So, $1,000 going to somebody making $40,000 a year has a different value than $1,000 going to somebody who makes a million dollars a year.
Ivy Hung: So the examples you mentioned earlier about giving value to household work or to people who are volunteers, and you know, giving values to people with lower incomes, stuff like that? How exactly would that impact their lives on a personal level?
Ken Pentel: Well, because budgeting is predicated on the GDP, right now, the picture that policymakers are getting painted does not reveal home care or housework. With the GPI, policymakers can make adjustments in their policy and investments based upon that new GPI picture. That's one example.
Another example would be seeing the value of a business and community groups that integrates volunteerism into their activity. GPIAtlantic in Nova Scotia did a study of volunteerism using what's known as the Genuine Progress Index, which is very similar to the GPI, but not the same. The gist was that they realized that they were losing volunteer hours in Nova Scotia. They calculated using the Genuine Progress Index that they were gaining about $1.9 billion a year of value in their province through volunteer work. Now, to the GDP, that $1.9 billion of value is invisible. It doesn’t exist because no money was exchanged. If you don't measure something, it doesn't matter to the economy. If you measure it, then it matters. With the GPI, policymakers and banks could invest in companies or nonprofits that are doing volunteer activity, because they would recognize that the volunteerism those companies are engaging in is offering value to society.
Ivy Hung: So just to be clear, what you’re saying is that with the input of the GPI, volunteer companies or nonprofit organizations who work towards goals like preserving wildlife or helping the homeless would be given actual value, and that that would bring in more investors to companies such as those?
Ken Pentel: Yes, exactly. I use “painting a new picture” as a metaphor for this. For example, say somebody is volunteering to reduce homelessness. Right now you're looking at a picture painted by the GDP and you don't see that person helping the homeless. But with a Genuine Progress Indicator, you bring an artist in, and they paint that person into the picture, and you go, “Oh, now I see they're doing that, oh, that's important work, that person's helping.” There's a lot of volunteerism that goes on that just is invisible to the GDP. The GPI helps create a far more accurate assessment of what is happening based on the scale and volume of activity.
This goes for people who do housework, too. Now you start painting their work into the picture, all the stuff they do from five in the morning till nine at night, every day, getting the children up, getting them ready to school, helping with homework, and all these other activities. You start painting a different picture for policymakers. Now the policymakers sit in a committee and they go, “Oh, what was invisible before is visible with the GPI. Now I see more accurately what is keeping this economy healthy.” That's the difference. Somebody who is taking care of a home is really taking care of the economy, because the people that get out into the workplace need to be fed, have their clothes clean - you know all these things that right now are not visible in the GDP picture.
This would also include the ecological discussion. Right now, a forest is only valuable to the GDP when it's cut and turned into product: timber or chip wood. In the GPI, a forest is valuable in-and-of-itself; fixing carbon and soil, filtering water and air, habitat for birds. So where the GDP does not care about ecological services or ecological work of a forest, the Genuine Progress Indicator does. And that is endemic in a variety of spheres.
Ivy Hung: Yes, everything makes more sense now. Thanks for clearing it up.
Ken Pentel: Oh, good. It's not an easy discussion for many people, because a lot of people really don't want to know all these moving parts.
Another example of one of the trends that the GDP has accelerated is human migration from rural to urban, because the GDP undervalues local and rural economies, and overvalues urban and suburban economies. So when you get major cities like Los Angeles, Minneapolis, St. Paul, Chicago, Beijing, Shanghai, Lagos, Mexico City, Tokyo, which have millions and millions of people paying with money for a massive amount of external resources, such as; energy, food, transportation this triggers the GDP. Then the GDP says, “Oh, that's where the value is”. That density of activity where the money's being spent using the GDP measurement sends a signal to society that urban economies are more valuable. In contrast you have rural communities and economies that are more self-reliant, self-sufficient, longer driving distances, less dense; valuable, yet not valued in the way we are now measuring the economy.
This has contributed to an incredible gravitational pull of human population from rural to urban the last 80 years. Right now we're adding about two million people a week to cities on the planet. They're ballooning. And the danger of this, from my point of view, is that most of the people in the cities are detached from the consequences of their dependencies. They don't know where their energy comes from. Many think the food grows on the store shelf at the store; they don't know the consequences of sprawl.
The dominant economic signal that everyone's chasing is embedding us into this very dangerous condition; because we're running out of space.
The GDP does not care about limits. It's a growth imperative. But infinite growth on a finite biosphere can’t be sustained. The GPI does recognize limits, and it recognizes the limits of the biosphere. That's one of the goals - one of the benefits - of the Genuine Progress Indicator: it starts to move us towards more of a steady-state, and living in more in balance with Earth.
But right now, we are well beyond carrying capacity. Everyone's chasing the GDP. And it's taking us into more and more overshoot, which leads to ecocide, which leads to extreme danger for all living and dying things on Earth right now.
The GDP is one of the reasons that we keep acting the way that we're acting, because the way we measure the economy creates incentives, and incentives leads to behavior. To change behavior, you need to change the incentives; and the Genuine Progress Indicator changes those incentives.