Premier MacLauchlan continually equates good economic news with an expanding Gross Domestic Product (GDP). But since the GDP only values certain types of economic activity, it presents a fundamentally distorted and dishonest picture of the economy. Unpacking what the GDP “values” and “doesn’t value” shows why we need a new model and new language to identify and describe positive economic activity if we are to properly measure and enhance the well-being of both Islanders and our environment.
The GDP always regards monetary “expenditures” as contributing positively to the economy, even when they could (and should) be avoided. If the government decided not to spend $100,000 on sanitation in Island schools, which caused an epidemic costing $10 million in health care costs, such a decision would clearly be irresponsible. But since “responding” to an epidemic requires 100 times more in expenditures than “preventing” an epidemic, GDP calculations make bad government decisions costing millions look like “good news” for the economy.
The GDP also fails to calculate the “loss of value” from pollution or the degradation and destruction of natural resources. When massive amounts of chemicals fertilizers and poisons are used to produce french-fry potatoes for Cavendish Farms, such economic activity increases the GDP; yet the long-term harm from soil degradation, groundwater contamination, or the ruination of coastal estuaries from nitrogen-rich erosion run-off is nowhere factored into the GDP equation.
Neither does the GDP give any positive value to leisure, which is essential for the health and well-being of Islanders. What’s the point of having a high GDP if Islanders are overworked and sick; or never have time to spend with their children in leisurely, recreational activities?
The GDP also discounts the value of home production and community service by considering only what can be “monetized.” Hiring someone to clean our home or cook our meals increases the GDP, even though the total amount produced is the very same as if we did those things for ourselves.
On the other hand, more Islanders growing and preserving their own organic food wouldn’t increase the GDP at all. In fact, decreased revenue from fewer sales of unhealthy processed foods at corporate food retailers would shrink the GDP, making more organic gardens in PEI, healthier diets, and increased food security look like “bad news” for the economy!
And the GDP doesn’t care how goods and services are distributed, which completely masks poverty, corruption and social injustice. Imagine two economies of equal size where everything is owned and controlled by a dozen people with economy-A, while everything is distributed equally with economy-B. In both cases, the GDP per capita will be the same, despite the majority of people suffering hardship and poverty in economy-A while a few people live in luxury.
We need government to track “concrete” indicators of poverty (not “abstract” indicators of wealth) providing quarterly data on the number of Islanders who are living below the poverty-line, lining up at soup kitchens and food banks, unable to afford suitable housing, etc. Such a shift in focus would inspire policies and programs to address economic problems and improve the well-being of all Islanders, especially the poorest.
So the next time you hear the banks, or the Atlantic Provinces Economic Council (APEC), or Premier MacLauchlan excitedly reporting an increase in PEI’s “GDP,” don’t think “Gross Domestic Product”…..think “Generating Deceptive Propaganda,” because that’s exactly what’s going on.