Failed ideology the cause of Irish inequality

Successive Irish governments have repeatedly ignored the need to shape policy on a new set of indicators that measure real social progress rather than just economic progress. Their obduracy has squandered the potential for “major social gains” during the Celtic Tiger era, a conference heard on Tuesday. The same policy recommendations were re-iterated at the conference. By Malachy Browne. Additional reporting by Deirdre O'Regan.

In 1996, Sean Healy and Brigid Reynolds (pictured), directors of Social Justice Ireland (SJI) wrote a policy document outlining how government’s reliance on Gross Domestic Product (GDP)* and Gross National Product (GNP)* was a misguided measure of progress. Government focused principally on increasing GNP in the context of policymaking, they said, while disregarding poverty, income distribution and other social measures. This produced a distorted picture of how well Ireland was doing. Healy and Reynolds argued that a new set of indicators was urgently required to avoid a growth in poverty, homelessness and exclusion.

Thirteen years later, and Healy and Reynolds are making the same policy recommendations at the SJI annual conference, held on Tuesday. Their 2009 report, ‘Beyond GDP’ describes the “seriously flawed” understanding of progress by government, and the failure of the prevailing economic model they sought to change in 1996. They say that much of the debris – such as crippled social services and a fragile and untrustworthy banking system - in the wake of the economic crisis could have been avoided had Ireland’s development model concentrated on building a better, fairer Ireland. They observe that the primary concern of government is still to generate economic growth; Healy again warns that “GNP and traditional economic indicators can be destructive because they can dull public awareness of the actual situation”. 

The technicalities of GNP’s deficiency were outlined at the conference by PJ Drudy, a lecturer in the Department of Economics in Trinity College Dublin. GNP and GDP both fail to account for many goods and services not exchanged in the marketplace, he said. “No value is placed on… unpaid work in subsistence agriculture… and work, including the caring for children, the sick, the elderly and those with disabilities in the home”. Indeed, certain activities which involve damage to society increase GNP and GDP: cleaning up pollution and addressing environmental degradation – these costs increase GNP and GDP. Similarly:

• “Military hardware and lethal weapons designed to kill are given the same status in the valuation of GNP as other more benign goods such as medicines or food
• “The extraction of non-renewable oil and gas from the ground increases the growth rate of GNP today, but reduces the possibilities for future generations and should therefore be counted as a cost rather than simply a benefit in the national accounts
• Land ownership, a valuable asset which can be leveraged to improve life chances, is not counted in GNP.

The need to supplement purely economic measures of progress has long been recognised (see quotes below). And in Ireland, the SJI were not alone in voicing their concern with GDP-centric policy. In its 1996 strategy report, the National Economic and Social Council (NESC) warned that even in periods of strong economic growth—1960-73 and 1973-79 — problems emerged in which the common factor was the “insufficient appreciation and acceptance of inter-dependence in the economy and society”. Indeed, as early as 1977, the NESC proposed that social reports would make possible “more informed judgments about national priorities”.

With the publication in 2000 of the Programme for Prosperity and Fairness (PPF) it seemed that these issues would finally be addressed. Two years later, the NESC was charged with setting out the PPF framework to measure “sustainable economic, social and environmental” progress. The goal was to “enhance evidence-based policy making”.

However, by December 2005, NESC reported that “data which would permit evaluation of the effectiveness of [policy] is lacking”. It noted “a significant gap” between policy and what is accomplished in practice, and it said “the implementation of formally agreed strategies can be weak, leadership is frequently contested… and social policy as a whole is not sufficiently aligned with the economic policies being pursued by the state.” Speakers and attendants at the SJI conference on Tuesday echoed these frustrations, citing an obstinacy within certain government departments to change.

There is a growing international impetus to reshape the idea of progress and well-being. Bhutan has an index of Gross National Happiness. The United Nations has published a Human Development Index since 1990, though this does not take into account ecological factors and sustainability. The Stiglitz Commission (chaired by economist Joseph Stiglitz - pictured left) reported in September of the need for “new accounting systems that better assess distributional issues, sustainability and people’s quality of life”.

Two similar reports, the ‘National Accounts of Well-being’ and the ‘Happy Planet Index’, were published this year by the New Economics Foundation (nef). Nic Marks of the nef said at Tuesday’s conference that although these “new accounting systems” sound unconventional, in fact they espouse “an original ethos of national accounting”.

Marks described how fledgling national accounts systems in 1930s US and Europe had “an explicit focus on understanding and enhancing general welfare”. But wartime changed the emphasis toward maximizing the productive capacity of the economy. The framework was standardised in peacetime, “leaving a legacy of national accounting apparatus that prioritises gross productivity above all other consideration”.

Social Justice Ireland propose the immediate establishment of ‘shadow’ national accounts which include the value of items such as unpaid work and the cost of destruction of natural resources. SJI also suggest placing a higher value on the common good through ensuring a more equal provision of services and a greater sense of solidarity. It wants government to incorporate meaningful new indicators of progress into core policy making and planning processes at local, national and international levels to reflect a new set of values. 

It is clear that these measures are long overdue.

The folly of economic obsession, in quotes

“We will find neither national purpose nor personal satisfaction in a mere continuation of economic progress, in an endless amassing of worldly goods. We cannot measure national spirit by the Dow Jones Average, nor national achievement by the Gross National Product. For the Gross National Product includes air pollution, and ambulances to clear our highways from carnage. It counts special locks for our doors and jails for the people who break them. The Gross National Product includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and missiles and nuclear warheads…. It includes… the broadcasting of television programs which glorify violence to sell goods to our children.

“And if the Gross National Product includes all this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials… the Gross National Product measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile….” - Robert Kennedy, 1968

“A nation that keeps a watchful eye on its salmon runs or the safety of its streets makes different choices than does a nation that is only paying attention to its GNP” – Environmental scientist Donella Meadows, 1993

"Economists generally fail to recognize that the economy is merely one aspect of a whole ecological and social fabric; a living system composed of human beings in continual interaction with one another and with their natural resources, most of which are, in turn, living organisms. The basic error of the social sciences is to divide this fabric into fragments, assumed to be independent and to be dealt with in separate academic departments… economists fail to incorporate social and political realities into their models." Systems theorist Frijof Capra, 1983

*Gross National Product is the value of all final goods and services (or income) owned by (accruing to) the residents of a country in a year. Gross Domestic Product is the value of all final goods and services (or income) produced domestically in a year, regardless of the nationality of the owners of the factors of production. Because of the heavy presence of multinationals in Ireland, GDP is typically 15 - 20 per cent higher than GNP, so GNP is a more realistic measure of economic production.