From February 24 to March 3, the bean counters of the world attended the United Nations Statistics Commission in New York.
This reminded me of the last in person commission of March, 2020 which ended on the 7th. A few days later the world was not the same, as we were confronted by that which we now know as Covid-19 – as an experience that shook the world and changed it forever.
It is little wonder that as the 54th commission convened a seminar on February, 2022 titled “Beyond GDP Sprint” to probe the inclusive wealth approach to measuring well-being by identifying generally agreed areas of high priority for research and, where possible agree on common frameworks.
This subject is not new though.
Back in January, 2008 Nicolas Sarkozy, who was at that time the president of France, was quite displeased “with the present state of statistical information about the economy and the society”, and asked, Joseph Stiglitz (president of the commission), Amartya Sen (adviser) and Jean Paul Fitoussi (co-ordinator) to create a commission, and the Stiglitz-Sen-Fitoussi Commission was born. This happened just eight months before the 2008 financial meltdown.
It is not surprising to see an acceleration in the revival of this debate, especially in the post-Covid-19 pandemic period. And there is no doubt that statisticians may feel under siege, as those who created the UN Statistics Commission – nearly eight decades ago on the credentials of Kuznets’s notion of gross domestic product (GDP) – are now back to questioning its relevance.
For those wondering about the origins of GDP, in 1937 Simon Kuznets, an economist at the National Bureau of Economic Research, presented the original formulation of GDP in his report to the US Congress titled, “National Income 1929 to 1935”.
His idea was to capture all economic production by individuals, companies, and the government in a single measure, which would rise in good times and fall in bad.
And today statisticians have been hard at work expanding the scope of these measures.
That includes the introduction of the System of Environmental Economic Accounting (SEEA), which produced a milestone report tabled at the commission in 2012. This brought to bear the oft spoken about care for the globe and environment. Yet this is not enough. The impact of Covid-19 spooked policymakers. They now are intensifying questions about the adequacy of the GDP measures to understand the world they lead in.
Statisticians are now back in the spotlight just as they were by the end of World War II, when the Statistics Commission was established. The Statistics Commission’s first task was to undertake a statistical programme on national accounts in order to understand the core drivers of macro economic imbalances that plunged the the world into two world wars. Thus, the national accounts and the GDP as a standard for measuring the economy was born.
Sadly, this measure was abused as it totally obliterated well-being measures and their attendant under-girding sociological underpinnings.
Economics, instead of complementing the explanatory power of sociological infrastructure of nations, sought and successfully pushed sociological disciplines to the side. And powered by the strong politics of Thatcher and Reagan, Milton Friedman’s intellectual capital of market fundamentalism won the day through the International Monetary Fund (IMF) and World Bank instruments of user-pay and structural adjustments economics.
Later on Alan Greenspan, the long-serving chair of the US Federal Reserve Bank, would make a confession at a seminar at the IMF as he reflected on the 2008 financial and economic meltdown, that he could never have imagined the market collusion that would bundle the bad and the good in the housing space. The free market is not free…
The Competition Commission can well attest to this fact, with numerous cases brought against price fixing and collusion by companies.
So when the issue of beyond GDP arose, I asked the question at the event as to, “What was the point of pain?” Is it the measure or is it the political economy? And at that, free market fundamentalism devoid of seeking to understand the sociology and socialisation of capital, especially in the 1970s and 1980s is of little service.
However, there is hope in the current thinking because from the UN’s point of view the quest for addressing multidimensional vulnerabilities, especially those afflicting the Small Island Developing States (SIDS), is at the core of the agenda.
Amartya Sen says that poverty is multidimensional. And over the past decade at Oxford Poverty and Human Development Initiative (OPHI), Sabina Alkire and James Foster developed the Multidimensional Poverty Indices (MPI) to capture and quantify what Sen pointed us towards.
“Measurement is good,” argued the late Sir Tony Atkinson, “but what is important is what you do with measurement.”
In this regard the MPI measures are about spurring the world to eliminate poverty. The cry from politics for a beyond the GDP measure can only be useful if it says what mystery we are trying to solve.
To this end the presence of mind of Sen and Atkinson on eliminating poverty by shedding light for action on it is crucial. Otherwise, statisticians will soon break their backs under the ruler of measurement to no avail. Let’s first answer the why before we indulge in the rat race of how.
Dr Pali Lehohla is the director of the Economic Modelling Academy, a professor of practice at the University of Johannesburg, a research associate at Oxford University, a board member of the Institute for Economic Justice at Wits and a distinguished alumni of the University of Ghana. He is the former statistician-general of South Africa
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