14th September 2009 – remember this date. It’s the day that the Stiglitz Commission presented its report on improved GDP measurement to the French government. If the report has the impact that Nicolas Sarkozy hopes, it could eventually change the way politics and economics are done throughout the world.
Joseph Stiglitz arrives at the Sorbonne to deliver his report
The report, which runs to 291 pages in English, 324 pages in French, argues that current methodogy for measuring GDP, and therefore the performance of an economy, is inadequate because it doesn’t measure quality-of-life and ecological impacts.
Essentially, what these economists are saying is that we need to evaluate economies in terms of how they serves their society and environment, rather than measuring the economy purely in terms of the quantity of stuff produced. Changing GDP measurements would shift the goalposts for policy-making: the implications for countries everywhere could be wide-ranging.
The Commission started work in January 2008, before the financial crisis really hit, but the ensuing year of chaos has made its work even more relevant. The Commission argues that a more balanced GDP measurement could have assisted in blunting or preventing global banking collapse of September 2008:
“[Some of the members of the commission believe that] one of the reasons why the crisis took many by surprise is that our measurement system failed us and/or market participants and government officials were not focusing on the right set of statistical indicators. In their view, neither the private nor the public accounting systems were able to deliver an early warning, and did not alert us that the seemingly bright growth performance of the world economy between 2004 and 2007 may have been achieved at the expense of future growth. It is also clear that some of the performance was a “mirage”, profits that were based on prices that had been inflated by a bubble.”
Report of the Commission, Executive Summary pages 8-9
Will anyone pay attention? Will the recommendations be implemented? Perhaps the weight of old habits and vested interest will prevent change. But the timing of the report is masterly – the first anniversary of the Lehman Brothers collapse and just days before the G20 meet in Pittsburgh to discuss reform of the world financial system.
So this report will certainly be read and debated. Some will argue that the Commission’s membership was too “French” for the report to be more widely applicable. But as a statement of intent, endorsed by the government of one of world’s largest industrialised economies, the document is powerful in itself.
The Commission was convened at the insistance of Nicolas Sarkozy. Like all French Presidents, he’s a controversial figure – loved by some here in France for his energy and his will to change things, loathed by others for his autocratic style, his hardline stance on immigrants and his “bling bling” lifestyle.
If the findings of his Commission are indeed adopted widely, it could be ironic that Sarkozy, a right-wing president, and professed fan of free markets and liberal economics, could go down in history as the leader who initiated one of the most important advances in social and environmental progress in a century.
