How Maryland Is Envisioning An Economic Future Beyond GDP

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"How Maryland Is Envisioning An Economic Future Beyond GDP"

In a keynote address last Friday in Baltimore, Maryland Governor Martin O’Malley broke down the reasons behind his administration’s decision to make Maryland the first state in the union to employ a Genuine Progress Indicator (GPI), a quantitative assessment that integrates both the costs and the benefits of economic development into a monetary measure of whether growth is truly enhancing the welfare of individuals and communities. It marks a major, though mostly unnoticed, move toward thinking about the economy in terms of what works for people rather than sheer, raw output.

Vermont, Utah, Minnesota, and Oregon are currently investigating whether to follow Maryland’s lead on formally integrating the GPI into policymaking operations. Twenty additional states also looking to learn from Maryland’s example met last week in Baltimore at a summit organized by Demos, a New York-based progressive think tank.

The GPI is designed to augment or replace more traditional measures of the economy like the Gross Domestic Product (GDP) or Gross State Product (GSP) — aggregate measures that treat social costs such as the clean-up of environmental pollution or the building of new prisons as positive inputs to economic growth while excluding non-monetary inputs such as volunteerism, leisure, and housework from these calculations. GPI examines the true effect of 26 different economic, social, and environmental costs and benefits on our societies as a means of better analyzing the problems government is aiming at solving:

Governor O’Malley described the limitations of traditional GDP measures and his reasons for moving to GPI as follows:

We choose to use the tool of a Genuine Progress Indicator, because no one benchmark, no one measure, no one indicator paints a full picture of a city, state or country’s progress. We would not be satisfied if we opened up our kids’ report card only to find a grade in just one subject. GDP is an important measure, but it cannot be the only measure. It’s a decent test of our country’s cholesterol, yes. But we still need to know about our blood pressure, blood sugar, heart rate, and so forth.

Our country’s GDP has doubled over the last three decades. Yet, things like income inequality,… middle class opportunity,… the amount of poisonous carbon pumped into our atmosphere: these graphs simply aren’t moving in the right direction…

GDP tells us what we are producing. But it totally neglects what we are using up. There is a difference between income – which is fleeting – and wealth, which is lasting.

To make genuine progress, we must be willing to adopt a more holistic definition of progress itself. To seek an honest assessment of whether our graphs are moving in the right direction – or in the wrong one.

How does bringing GPI into government actually change policy? Maryland has used its GPI to help shape strategic planning and development in three primary areas: smart growth, clean energy, and green jobs. Depending on a state’s particular needs in terms of wellbeing, different policy priorities might emerge on things like poverty, human rights, or open space. Above all, the rising use of alternative indicators suggests that the states are seriously reconsidering the traditional focus on growth for growth’s sake or growth at any cost.

“A system without feedback eventually fails. And our country, our states, our cities — they are all systems. Life creates the conditions that are conducive to life. Period. Full stop. Perhaps, there is no better description of the intent of GPI. Its purpose is to further the conditions that are conducive to life,” as Gov. O’Malley wisely put it.

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