Promise of a Living Standards Framework

OPINION:

Budget 2018 was a dry speech that despite its subtitle, Foundations for the Future, did little to evoke optimism for people to ‘‘… have better lives in the decades to come’’. Forgive my skepticism. Despite Grant Robertson announcing that his Government’s priorities were different from its predecessor’s, his budget framing still prioritised economics ahead of people.

Business-as-usual adorned in environmental and social shrouds was for me, the message between the lines.

Until that is, I got to the last page where the game changer I was looking for, showed its promise.

Our Government is to move beyond traditional measures of economic growth as indicators of success.

The indicator that they and most governments around the world use, is GDP growth.

In a neoliberal economic system, GDP growth is the driver of social and environmental harms. So what is GDP? To quote Wikipedia, Gross Domestic Product is a monetary measure of the market value of all final goods and services produced in a year.

So it’s about how much we spent on consuming, investing and exporting manufactured goods and services minus those imported.

This means that the costs of the Christchurch rebuild for example, is counted as adding to GDP growth.

But the infrastructure destroyed in those earthquakes is not subtracted from GDP.

Never mind the angst and grief felt by many.

And never mind the environment impacts of dumping the spoils of the rebuild, and of extracting the resources to build with.

Perhaps the main difficulty with GDP as a measure of wellbeing is that if a product or service has zero cost, then it has no value.

There are many tech-related goods and services that we pay nothing for, but materially add to our standard of living. Google for example. Economists around the world have long recognised these inadequacies of using GDP as a measure of human wellbeing.

So there are now measures such as the Happy Planet Index, Gross National Happiness and more.

New Zealand has its own alternative measures to GDP and this government is promising to apply them in the 2019 budget.

Developed by the Treasury since 2011, the Treasury Paper, ‘‘The Treasury Approach to the Living Standards Framework’’ describes four Capitals that need to work together to add to the flow of human wellbeing.

Human capital is an individual’s skills, knowledge, mental and physical health.

It enables people to participate fully in work, study, recreation and in society more broadly.

Social capital includes the networks between people, the social connections that provide emotional, instrumental and informational support.

Natural capital are the aspects of our environment that improve intergenerational wellbeing, including land, soil, water, biodiversity, minerals, energy resources, and ecosystem services.

Finally there is financial and physical capital which looks a lot like the GDP measure.

So it is that swimmable rivers may become a Budget measure next year.

I like that concept.