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Beyond GDP - Day 2 (afternoon) Summary

by nanne Wed Nov 21st, 2007 at 07:06:19 AM EST

The second day of the Beyond GDP conference in Brussels is split into two parts. The first part could be called 'the meat', consisting of two sessions going deeper into alternative measures by exploring 'insights from recent practice' and looking at 'what the new measures say and how they can be used'. The second part was about the way forward. This is a summary of that second part.

Once again, I refer to the programme.

Although I missed most of the first part, at the end of the conference the chair said that the videos from the individual sessions would be put online, as well as the presentations given and the proceedings. So another part may be upcoming...

Tuesday's afternoon sessions consisted of one panel with four speeches; a discussion by the audience which in practice turned into a session of speeches and comments as input for the conclusions on the way forward (the coherence of these varied), and concluding remarks by Stavros Dimas.

These first two parts certainly provided a good deal more entertainment than Monday's sessions. There was a lot of criticism of neoclassical economics, and some different views were put forward on whether economists should be re-educated, or if we would have to breed a new generation of economists. I think we might take some inspiration from this and now venture into a lengthy debate on the pressing question of whether economists should be tried for treason, or merely be sent to re-education camps.

Just to push the overton window a bit...


Unfortunately, none of the more radical criticism made it into the concluding remarks of Stavros Dimas, who repeated the line of Barroso and Almunia that GDP was a good measure of economic activity, as it is clear, simple, and comparable, but that checks and additions are needed for uneconomic growth, externalities and intangibles.

The list of speakers:

Enrico Giovannini (Chief Statistician, OECD) (Chair); Ashok Khosla (Co-President, Club of Rome); Walter Radermacher (President, Federal Statistical Office, Germany); Miloslav Ransdorf (Vice-Chair, EP Committee on Industry, External Trade, Research and Energy); Jerome Vignon (Director, European Commission, DG for Employment, Social Affairs and Equal Opportunities); Stavros Dimas (Commissioner for Environment).

One of the main conclusions on which there was wide-ranging consensus is the need for better communication through better conceptualisation. The idea is that there is a mass of data, of information out there, but that we lack the concepts to convey this information adequately. Hans Rosling seems to have made a big impact with his presentation on Monday, as he was referred to several times. Giovanni called this challenge 'moving information into knowledge'. Several audience members mentioned the need to develop this conceptual toolset in a broad and democratic manner. One participant from Australia stated that democracy and human rights were part of the progress that we want to measure, and one from Slovenia mentioned the possibility that if we don't develop and communicate a broad and transparent toolset, interests groups could easily cherry-pick the way they way in which they represent statistics.

The last aspect is related to the series of Jake S here on how to lie with numbers. I'd rather doubt that we can prevent that by developing more measures and concepts, educating people on ways to lie with statistics and on the psychological effects of different ways of representing statistics seems more promising.

Aside of conceptualisation, better communication to the press was also mentioned by Giovanni, Rademacher and audience members. Considering that Google News gives me 5 post-conference news stories in English, one in French, none in German and one in Dutch, that is an aspect that really needs to be worked on a bit more.

Criticism of economics came from Khosla, Ransdorf, and the audience. Khosla, who is from India, painted the consequences of neoliberal policies in India, which have led to an explosive growth creating many billionaires and a booming stock market, while at the same time hundreds of millions still live below the poverty line. He stated that "we are living in a world that has completely lost its bearings". Khosla was one of the few who questioned the accuracy of the GDP number, stating that methodologies were vague. However, he preferred to concentrate on the psychology and mindset furthered by the use and reporting of the measure. The reporting on GDP in India is a bit like covering a horse-race. Is it going to be 9% growth, or 9.5%? This fosters a mindset that defines the good life by the amount of goods we have hoarded instead of who we are. Khosla had a couple of really good lines worth quoting/paraphrasing: "We talk so much about decoupling things from GDP [like CO2 emissions and waste]. What is really decoupled is livelihoods and employment, because of the way we have chosen to push GDP". Concluding the presentation: "Indicators ought to be defined by the viewpoint by the last, by the poorest, by those who got left behind and not those who dominate the decision making in our societies".

Ransdorf mentioned an experience he had with Vaclàv Klaus, who had told him years ago that economics was unlike other social sciences, because it is a hard science with universal validity. Ransdorf disagreed and thought that economics is different because it is the only social science that does not question its basic assumptions. Economics has made no successful prediction in the past twenty years, not on any major crisis. He mentioned the growth of China as an example of an uneconomic process, saying that China had seven times the carbon intensity of West European countries. Ransdorf referred to 'an article in Foreign Affairs' which is probably this one by Liz Economy. The statements on China were later moderated by a member of the audience who mentioned that we have to be careful about the framing as the West is responsible for a good deal of the pollution in China (this is to the tune of 23%, see 3E Intelligence).

The presentation of Vignon was mainly on measurements made in the framework of the EU's strategy to combat poverty and unemployment. He showed some of the difficulties of correlating different statistics by example of the poverty rate and growth in employment (don't know if he took the employment rate or just employment). Growth in employment in different countries showed little correlation with the development of the poverty rate, which was due to a number of factors, first and foremost the fact that you can work and be poor, secondly the hypothetical case that growth in employment might leave out jobless households (increasing employment mainly among households where one member already works). Factoring these elements into the graph which shows the correlation would make the graph illegible, according to Vignon. Me, I don't see why you could not adjust/weigh some of the elements, potentially in a dynamic graph. A related question from the audience was posed on social security systems. Poverty is meant to be covered by social security, but we have little indicators that allow us to compare social security systems, and we should work on that.

Giovanni finished up the panel by noting that we need an action plan and a timeline, to find out what we can take forward upcoming events. The OECD will organise a Third World Forum in 2009, the EU needs to discuss various strategies post-2013 and we will formulate new Millennium Development Goals in 2015. Audience members mentioned two events in 2010: the formation of a new Commission and another Spring European Council that will evaluate the various strategies on renewable energy, energy efficiency and CO2 emissions.

Some statements of the audience not yet mentioned are worth repeating

A number of people in the audience referred to the Lisbon Strategy in various shades of disapproval. Some felt that it was evil, where others thought it was a 2-dimensional solution (competitiveness and labour participation) to a 3-dimensional problem. It was felt that the Lisbon Strategy needs to be merged with the EU's Sustainable Development Strategy, preferably tomorrow.

Several statisticians questioned whether new approaches would really effect much. After all, reports like those of the Club of Rome have been around for a long time and policy-makers have only acted tentatively on them, where they have acted at all. These statisticians felt that we need more political bravery.

There was disagreement on the quality of available data. Some audience members felt that we had quite a lot of information already and that we mainly need to collect it, put in in a coherent framework and use the right tools for conceptualising the data. Others were more sceptical about the quality of available information. A representative from the ILO stated that in the EU and in the west there may be a lot of data, but that data in the developing world is often very poor, and that the EU has a responsibility to help the developing world out. National authorities in the developing world should at least have done a household survey by 2012, so that the results can go into the discussion about the Millenium Development Goals.

A German audience member stated that progress has something to do with the future. We are looking at measures of a state here and not at measures for future-readiness (Zukunftsfähigkeit). We need to have a future-oriented perspective on the development of the economy. Elements to look at in the framework of economic sustainability are the presence of early-warning systems, resilience of the economy, available redundancies and the degree of diversity. This statement had me practically jumping up and down in my seat thinking yes! indeed! yes! yes! In the context of sustainability and its three pillars I hear all the time about 'not forgetting about the economy', 'making sure that sustainability is coupled to growth' or even worse 'making business sense of sustainability'. Economic sustainability is not about balancing environmental and labour protection with economic growth! It's about applying principles of sustainability to the economy.

The conclusion by Dimas did not reflect the more radical parts of the discussion, as stated. Generally, Dimas concluded that there had been consensus on the view that no single measure could be used to replace GDP. A variety of measures and approaches are needed. Movement has to be made on all fronts, from a set of key indicators, to composite measures, to integrated environmental, social and economic accounting. These tools will not be perfect at the outset, but we have to experiment with them and improve them over time.

Dimas mentioned that there will be a Communication from the Commission on the topic of this summit in early 2008 (great, another Communication...). However, he proposed some promising measures. One is to more frequently update reports on the natural stock of the EU. He mentioned that the stock market news can be accessed every day (actually, more like every second), but that some of the data on natural stocks is many years of age. The other is to develop a sustainability scorecard within his DG. The Commission has these scorecards in other areas (for instance state aid, competitiveness...), so this could be done relatively quickly. The opening and closing statements of Dimas could be used to sum up the conference:

'Politics is about changing the world that we live in'

'To challenge the world, you need to change the way we understand the world'

Update [2007-11-21 12:50:24 by nanne]: Previous diaries on eurotrib:

On (moving beyond) GDP:

Minor Errors
Anyone attending "Beyond GDP"?
Measuring Progress (pt. 1)
Happiness and Economics
Regrettables
Socratic Economics I: Why GDP growth above all else?
Let's Ban the GDP

On lying with statistics:

How To Lie With Numbers 2 - Laffer Nonsense From The WSJ
How To Lie With Numbers 1˝
How To Lie With Numbers - a short guide to politics and other things
Soundbite Statistics: the Unemployment Rate (1) (with further links)
Lies, Damn Lies and Fertility Statistics
How to lie with statistics, or Spin 401

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But social capital intervened.
by nanne (zwaerdenmaecker@gmail.com) on Wed Nov 21st, 2007 at 07:07:37 AM EST
Khosla had a couple of really good lines worth quoting/paraphrasing: "We talk so much about decoupling things from GDP [like CO2 emissions and waste]. What is really decoupled is livelihoods and employment, because of the way we have chosen to push GDP". Concluding the presentation: "Indicators ought to be defined by the viewpoint by the last, by the poorest, by those who got left behind and not those who dominate the decision making in our societies".

This sounds familiar.

Truth unfolds in time through a communal process.

by marco on Wed Nov 21st, 2007 at 09:17:20 AM EST
European Tribune - Beyond GDP - Day 2 (afternoon) Summary
The statements on China were later moderated by a member of the audience who mentioned that we have to be careful about the framing as the West is responsible for a good deal of the pollution in China (this is to the tune of 23%, see 3E Intelligence).

Hmmm, I just to a look at that paper -- "Who Owns China's Carbon Emissions?" (PDF) from the Tyndall Centre for Climate Change Research -- and unless I'm misreading it, I think it's not only Western countries that are "responsible" for 23% of China's carbon emissions, but all countries that import goods from China.  And looking at who the top 10 importers from China are,

US-China Trade Statistics and China's World Trade Statistics

Table 8: China's Top Export Destinations 2006 ($ billion)
Source: PRC General Administration of Customs, China's Customs Statistics
Rank Country/Region Volume % Change*
1 United States 203.5 24.9
2 Hong Kong 155.4 24.8
3 Japan 91.6 9.1
4 South Korea 44.5 26.8
5 Germany 40.3 23.9
6 tde Netderlands 30.9 19.3
7 United Kingdom 24.2 27.3
8 Singapore 23.2 39.4
9 Taiwan 20.7 25.3
10 Italy 16.0 36.7
*Percent change over 2005

The paper notes that Many of the goods exported to Hong Kong from mainland China are re-exported to other countries such as the UK after value-added processes have been performed. The major destinations of Hong Kong's re-exports, besides the Chinese mainland itself, are the USA, Japan, Germany and the UK.

But even with this qualification, I still think rather than saying "Western" countries are responsible for 23% of China's CO2 emissions, perhaps it would be better to say "countries with developed industrial economies" or something along those lines.

Truth unfolds in time through a communal process.

by marco on Wed Nov 21st, 2007 at 10:17:00 AM EST
Thanks for doing the research! I was also wondering if this statistic is somehow connected to the PPP valuation of China's GDP (as you know, China is now 'worth' 40% less, which can affect all kinds of statistics).

The briefing says:

The trade values used here are expressed in actual terms, not in terms of purchasing power parity (PPP). This is because the monetary value of internationally traded goods is recorded at international prices. So it makes sense to use a consistent monetary unit across countries.
The analysis finds out that in 2004, China `avoided' emitting around 381 million tonnes of CO2 due to the import of goods and services. At the same time, goods that were exported from China generated approximately 1490 million tonnes of CO2. The overall effect was that around 1109 million tonnes of CO2 were emitted by China as a result of net exports. This accounted for 23% of China's total CO2 emitted in that
year (4732 million tonnes).

I think that the changed GDP measure should not affect this, however I am not completely sure because the authors do not explicitly state whether they use the PPP measure for China's own GDP and I don't know how the % exports have of GDP plays into the analysis...

Whether Japan, South Korea and Singapore can be included in 'the west' is a flavour of the month kinda political question (the west being a political label for those who ride with US and are rich like US). I assume you'd have some interesting thoughts about the socio-cultural aspects.

by nanne (zwaerdenmaecker@gmail.com) on Wed Nov 21st, 2007 at 10:59:51 AM EST
[ Parent ]
The other is to develop a sustainability scorecard within his DG. The Commission has these scorecards in other areas (for instance state aid, competitiveness...), so this could be done relatively quickly. <...>

These tools will not be perfect at the outset, but we have to experiment with them and improve them over time.

What role(s) do these scorecards play in other areas?

Truth unfolds in time through a communal process.

by marco on Wed Nov 21st, 2007 at 10:26:03 AM EST
Name & shame
by nanne (zwaerdenmaecker@gmail.com) on Wed Nov 21st, 2007 at 10:34:10 AM EST
[ Parent ]
Sounds like a good approach.  As long as societies are no longer just worried about GDP, but about other factors -- and everyone knows who's performing well, and who is slacking.

Truth unfolds in time through a communal process.
by marco on Wed Nov 21st, 2007 at 05:09:19 PM EST
[ Parent ]
by nanne (zwaerdenmaecker@gmail.com) on Wed Nov 21st, 2007 at 01:45:07 PM EST
[ Parent ]


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