Needed: a Score Card On National Growth
ONE of President Clinton's less-noticed Earth Day executive orders was to speed up the efforts of the Bureau of Economic Analysis to correct the gross domestic product (GDP) by including environmental accounting. This is long overdue, and even so, another year will pass before a "greener" GDP will emerge.
Why is the correction of GDP (and its broader cousin, GNP, or gross national product) so important? Because GDP and GNP were adopted back in World War II to help focus efforts on maximizing war production. So these indicators, which we use as overall measures of "progress," value bombs, bullets, and tanks very highly while setting at zero the value of the environment, as well as education, human resources, and our infrastructure (roads, rails, public buildings).
No wonder this kind of accounting threw our further economic growth off-course and produced today's rising backlog of social and environmental costs. The bills for all this illusory economic growth are now coming due. For example, the Department of Energy and the Department of Defense have just announced that cleaning up their toxic waste sites will cost $400 billion over the next 30 years.
Mr. Clinton, sensibly following the advice of Vice President Al Gore Jr., has decided it's time to get the national accounts straightened out so this sort of thing won't happen again. As I and others have pointed out, GDP and GNP still add all these cleanup costs to the plus side - as if they were useful production. So, in effect, oil spills, releases of toxic wastes, and auto accidents all increase the GDP. The new "greener" GDP will help avoid these kinds of mistakes in the future.
In addition, the corrected GDP will help guide the economy toward properly pricing valuable natural resources, such as trees, and costing out pollution ahead of time. This, in turn, will allow recycled materials and products to compete with those made from newly extracted raw materials. And it will make prices reflect more of the true costs of production.
But Clinton should not stop there. We're not the only ones who need to correct the GDP to reflect environmental costs and benefits. All the 178 countries that signed Agenda 21, the major agreement of the 1992 Earth Summit in Rio de Janeiro, also agreed to make the same corrections to their GDP accounts, so as to keep the global playing field level.
In addition, we need to account for our country's infrastructure on the books, so as to have a national "net worth" statement, just as companies do. As we try to cut the deficit, we need to be sure that we have a correct account of it. If our infrastructure is not included as an asset, we may actually cut too deeply.
Similarly, GDP needs a poverty-gap measure, since often, in many countries, rising GDPs mask greater inequity in incomes. Averaging incomes per capita, as GDP does, means a country could have a few billionaires while everyone else is poor.
Why not a new American score card to account for progress toward all the major goals of the electorate, including education, health care, and the environment. An April 1993 survey by the Americans Talk Issues Foundation asked if Americans would like such a new national score card to hold politicians accountable for progress toward these overall quality-of-life goals, as well as GDP and economic numbers. Seventy-two percent favored this proposal.
Such a new score card for progress toward America's goals would help people score the game for themselves and keep the politicians on their toes.