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       WHAT IS THE GENUINE PROGRESS INDICATOR?

The Genuine Progress Indicator (GPI) is a new measure of the
economic well-being of the nation from 1950 to present.  It
broadens the conventional accounting framework to include the
economic contributions of the family and community realms, and
of the natural habitat, along with conventionally measured
economic production.

The GPI takes into account more than twenty aspects of our
economic lives that the GDP ignores.  It includes estimates of
the economic contribution of numerous social and environmental
factors which the GDP dismisses with an implicit and arbitrary
value of zero. It also differentiates between economic
transactions that add to well-being and those which diminish it.
The GPI then integrates these factors into a composite measure
so that the benefits of economic activity can be weighed against
the costs.

The GPI is intended to provide citizens and policy-makers with a
more accurate barometer of the overall health of the economy,
and of how our national condition is changing over time.

While per capita GDP has more than doubled from 1950 to present,
the GPI shows a very different picture.  It increased during the
1950s and 1960s, but has declined by roughly 45% since 1970.
Further, the rate of decline in per capita GPI has increased
from an average of 1% in the 1970s to 2% in the 1980s to 6% so
far in the 1990s.  This wide and growing divergence between the
GDP and GPI is a warning that the economy is stuck on a path
that imposes large -- and as yet unreckoned -- costs onto the
present and the future.

Specifically, the GPI reveals that much of what economists now
consider economic growth, as measured by GDP, is really one of
three things: 1) fixing blunders and social decay from the past;
2) borrowing resources from the future; or 3) shifting functions
from the community and household realm to that of the monetized
economy.  The GPI strongly suggests that the costs of the
nation's current economic trajectory have begun to outweigh the
benefits, leading to growth that is actually uneconomic.

If the mood of the public is any barometer at all, then it would
seem that the GPI comes much closer than the GDP to the economy
that Americans actually experience in their daily lives.  It
begins to explain why people feel increasingly gloomy despite
official claims of economic progress and growth.

The GPI starts with the same personal consumption data the GDP
is based on, but then makes some crucial distinctions.  It
adjusts for certain factors (such as income distribution), adds
certain others (such as the value of household work and
volunteer work), and subtracts yet others (such as the costs of
crime and pollution).  Because the GDP and the GPI are both
measured in monetary terms, they can be compared on the same
scale.


1. CRIME & FAMILY BREAKDOWN

Social breakdown imposes large economic costs on individuals and
society, in the form of legal fees, medical expenses, damage to
property, and the like.  The GDP treats such expenses as
additions to well-being.  By contrast, the GPI subtracts the
costs arising from crime and divorce.


II. HOUSEHOLD & VOLUNTEER WORK

Much of the most important work in society is done in household
and community settings: childcare, home repairs, volunteer work,
and the like.  These contributions are ignored in the GDP because
no money changes hands.  To correct this omission, the GPI
includes, among other things, the value of household work
figured at the approximate cost of hiring someone to do it.


III. INCOME DISTRIBUTION

A rising tide does not necessarily lift all boats -- not if the
gap between the very rich and everyone else increases.  Both
economic theory and common sense tell us that the poor benefit
more from a given increase in their income than do the rich.
Accordingly, the GPI rises when the poor receive a larger
percentage of national income, and falls when their share
decreases.


IV. RESOURCE DEPLETION

If today's economic activity depletes the physical resource base
available for tomorrow's, then it is not really creating
wellbeing; rather, it is just borrowing it from future
generations.  The GDP counts such borrowing as current income.
The GPI, by contrast, counts the depletion or degradation of
wetlands, farmland, and non-renewable minerals (including, oil)
as a current cost.


V. POLLUTION

The GDP often counts pollution as a double gain; once when it's
created, and then again when it is cleaned up.  By contrast, the
GPI subtracts the costs of air and water pollution as measured
by actual damage to human health and the environment.


VI. LONG-TERM ENVIRONMENTAL DAMAGE

Climate change and the management of nuclear wastes are two
long-term costs arising from the use of fossil fuels and atomic
energy.  These costs do not show up in ordinary economic
accounts.  The same is true of the depletion of stratospheric
ozone arising from the use of chlorofluorocarbons.  For this
reason, the GPI treats as costs the consumption of certain forms
of energy and of ozone-depleting chemicals.


VII. CHANGES IN LEISURE TIME

As a nation increases in wealth, people should have increasing
latitude to choose between more work and more free time for
family or other activities.  In recent years, however, the
opposite has occurred.  The GDP ignores this loss of free time,
but the GPI treats leisure as most Americans do -- as,something
of value. When leisure time increases, the GPI goes up; when
Americans have less of it, the GPI goes down.


VIII. DEFENSIVE EXPENDITURES

The GDP counts as additions to well-being the money people spend
just to prevent erosion in their quality of life or to
compensate for misfortunes of various kinds.  Examples are the
medical and repair bills from automobile accidents, commuting
costs, and household expenditures on pollution control devices
such as water filters.  The GPI counts such "defensive"
expenditures as most Americans do: as costs rather than as
benefits.


IX. LIFESPAN OF CONSUMER DURABLES & PUBLIC INFRASTRUCTURE  

The GDP confuses the value provided by major consumer purchases
(e.g., home appliances) with the amounts Americans spend to buy
them.  This hides the loss in well-being that results when
products are made to wear out quickly.  To overcome this, the GPI
treats the money spent on capital items as a cost, and the value
of the service they provide year after year as a benefit.  This
applies both to private capital items and to public
infrastructure, such as highways.


X. DEPENDENCE ON FOREIGN ASSETS  

If a nation allows its capital stock to decline, or if it
finances its consumption out of borrowed capital, it is living
beyond its means.  The GPI counts net additions to the capital
stock as contributions to well-being, and treats money borrowed
from abroad as reductions.  If the borrowed money is used for
investment, the negative effects are canceled out. But if the
borrowed money is used to finance consumption, the GPI
declines.

The above text is excerpted from The Genuine Progress Indicator:
Summary of Data and Methodology, Redefining Progress C1995.
Copies of the full reports are available for $10.00 by contacting:

Redefining Progress,
One Kearny Street, Fourth Floor
San Francisco, CA 94108 415-781-1191 Fax: 415-781-1198.