FAIR & Sbilanciamoci
  • Date submitted: 30 Oct 2011
  • Stakeholder type: Major Group
  • Name: FAIR & Sbilanciamoci
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Joint signature by FAIR and Sbilanciamoci!  

The world is faced with more and more urgent major challenges questioning the living conditions of humanity, first of all the climatic disorders, but also the lack of very unequally distributed resources, water, food, energy. The Rio+20 conference offers an opportunity to mobilize, collect and coordinate national and international wills to move towards the solution of these challenges.

To do this, we need multiple indicators, economic, ecological and social ones, to fight against thirst, starvation, the multiple dimensions of poverty, environmental pressure, and for the respect of human rights. Widely available indicators (GDP) or biased ones (ANS, Adjusted Net Savings) are in fact irrelevant to take these challenges into full account, either to alert the world opinion, or, finally, to guide and coordinate the national and international policies needed.

Early in the 2000s, the FAIR (French acronym for Forum for other indicators of wealth) and Sbilanciamoci collectives have been thinking and acting on indicators of wealth, inequality, welfare and sustainability. We will mention quickly the extent of the shortcomings of the dominant indicators (1). Then we will consider the method to select more relevant indicators in order to alert the public opinion and to guide national and international policies (2). Finally, for some global issues, we will suggest first possible indicators in order to bring them under discussion (3). At the end of this document, we rapidly develop some complementary points and specify what the FAIR and Sbilanciamoci collectives are. 

1 Inadequate or misleading monetary indicators dealing with global challenges

Monetization, or evaluating with the same monetary unit, seems, at first sight, to be a very convenient tool for making commensurable goods and services that enhance the well-being (which is a positive aspect), and deterioration of the natural heritage or pollution due to production and transportation (which is a negative aspect). But at the same time it is a dangerous instrument because it develops the fiction that it is possible to make equivalent, and thus to add very different dimensions of well-being or ill-being. Even worse, monetization gives the illusion that it would be possible to compensate these damages to the environment through investments or additional consumption. But such valuation conventions are the basis of the dominant economic indicators, like GDP (and their more or less green variations) and the ANS, which add quite dissimilar values and so, may mislead us about the meaning of progress.

  The GDP and its growth

Therefore we consider that, whatever the potential statistical usefulness of GDP in its domain of validity, it should not serve as a benchmark for policy- making, since it does not make a distinction between useful and harmful production. Moreover, the GDP indicator has contributed to conceal a number of major threats, including the environmental degradation that has spawned the ecological crisis and climate change to which the whole of humanity is now exposed. We welcome the fact that a number of renowned economists have underlined several of this indicator?s drawbacks and expressed their criticisms of the GDP growth objective, which has made a major contribution over the last few decades to pushing our societies against the wall which now stands in our way.

The Adjusted Net Savings (ANS) and the "green GDP" expressed in monetary units.

These indicators may draw the attention of the economists who tend to evaluate everything in money. We believe that these indicators are inadequate to face the challenges of sustainability, not transparent and incomprehensible to non-specialists. They would necessarily lead to the same mistakes as those resulting from the excessive use of GDP. You should know that because of the assumption founding these composite indicators (the total substitutability between the economic, human and natural capital), countries that follow clearly an environmentally unsustainable path (China, USA) obtained much better results than poorer countries with low environmental footprint!

2 How to choose appropriate indicators?

We have to build benchmarks for another world and for the transition. They must have a high legitimacy and they therefore cannot be defined from above even by the most renowned experts. We must thus dig in the participatory and deliberative democracy to define and to choose them. To do this, the right to speak up has to be given to the citizens involved (NGOs, trade unions, movements and civil society networks). It is up to such collectives to say what accounts, what can emancipate, what core values should underlie politic, economic, social and environmental choices, and what the indicators must be considered in order to lead us in the right direction.

3 Some first proposals for possible indicators to put in the debate

FAIR and Sbilanciamoci do not intend to propose a list of solutions. This would be contrary to their approach favoring an indicator democracy. But as part of the involved civil society, we wish to point out the indicators that in   our opinion deserve attention in the context of RIO + 20 and could be put into debate.

? National indicators of greenhouse gas emissions (per capita and total) in C02 equivalent, using the method of "carbon footprint" of a population, which accounts for the "carbon imported" by the population (See for example http://data.worldbank.org/indicator/EN.ATM.CO2E.PC )

? A composite indicator of environmental pressure: the ecological footprint (per capita and total) for the major renewable resources converted to "global hectares" or to "global acres" (cf. tables of ecological footprint and biocapacity, 2007, in http://www.footprintnetwork.org/en/index.php/GFN/page/footprint_for_nation s/)

? Indicators of water consumption, according to the "water footprint" method considering "imported water".

? Indicators of deforestation.

? Physical indicators of biodiversity (see the EU report entitled "Halting the loss of Biodiversity by 2010: Proposal for a first set of Indicators to monitor progress in Europe", EEA Technical report No 11/2007" in: http://reports.eea.europa.eu/technical_report_2007_11/en/Tech_report_11_ 2007_SEBI.pdf).

? Indicators of malnutrition and of the degree of populations' food security. See for example: http://www.combat-monsanto.co.uk/spip.php?article478 .

? Indicators of national energy consumption (per capita and total) and the degree of energy dependence and sovereignty of the people.

? Indicators of rights and freedoms for all, drawing particularly from the proposals of the ILO Decent Work. (http://www.ilo.org/Integration/themes/mdw/lang--en/index.htm , and http://www.emploi.belgique.be/moduleDefault.aspx?id=23882) and from the ideas of the Stiglitz Commission on this point.

? Indicators of income inequality such as the Gini index and indicators assessing the level of the informal economy in each country.

? Indicators of inequality and human poverty, including for example the Inequality-adjusted HDI (IHDI) and the Gender Inequality Index (GII) from the UNDP (Human Development Reports in the world, see the latest edition 2010, http://hdr.undp.org/en/reports/global/hdr2010/ ).  


About FAIR

The FAIR (Forum for Other Indicators of Wealth) Collective gathers some fifty scholars and activists thinking critically on the issues of the economic and societal progress indicators. The Stiglitz Commission was set up in 2008 by the French President to explore the limitations of current measurement indicators of socio-economic performance. FAIR was formed following the establishment of the Stiglitz Commission in order to ensure that existing work on these issues is taken into account. It also aims at ensuring that civil society is broadly involved in the Commission?s deliberations.

FAIR actors state, in the conclusion of their manifesto translated into several languages and adopted in early December 2008: « It's by giving meaning to non economic trades and to "what matters the most for us" that we will be able to redefine the notion of wealth, to refund sharing rules, but also how to account or to redistribute in an appropriate way. We will be able to restore its fair place - not the whole place - to the economy. »

See for more information http://www.forum-fair.org/

About Sbilanciamoci

Sbilanciamoci is an Italian coalition of 50 civil society organizations working on economic alternatives, globalization, peace, human rights, environment, fair trade and ethical finance. Since 2000, Sbilanciamoci has developed an alternative regional indicator called QUARS and, each year, applies it to elaborate an annual report reviewing the Italian Budget Law and to develop alternative proposals about how to use public expenditure for society, environment and peace arguing for social and environmental priorities. Sbilanciamoci! promotes national debate through the weekly web journal sbila

nciamoci.info. See for more information http://www.sbilanciamoci.org/about-us/

An assessment of the Stiglitz Commission Report according to FAIR

The FAIR collective welcomes the publication of the report from the ?Stiglitz Commission?, formed on the initiative of the President of the French Republic. Overall, this report sends out a useful signal in as much as it calls into question the excessive dominance of GDP as an indicator to guide public policy.

However, two aspects of the report remain highly problematic. First, the report?s conception of sustainable development is focused on the specific needs of future generations while ignoring two essential elements: on the one hand, the current unbearable social impact of the economic policies in place and, on the other hand, the demands of governance and democracy that should be taken into account in global wealth indicators.

The second problem concerns the role played by monetized indicators, which is excessive in our view. This is particularly the case of a proposed indicator derived from Adjusted Net Savings (ANS, developed by the World Bank), which is poorly suited, lacking in transparency and ungraspable for non-specialists. It would necessarily lead us to fall into the same misguided ways as those we should be seeking to correct. The report has been compiled as if the make-up of the Commission had rendered it unable to put into perspective what monetary accounts can tell us about human progress and ?sustainability?.

More information concerning the FAIR's statement on the Stiglitz Commission Report in: http://www.idies.org/public/FAIR/FAIR_release_english.pdf


The "Green" GDP and other monetized indicators

One of the ways suggested to go beyond GDP is an improvement of the system of national accounts in terms of social and human progress and sustainable development objectives. At the forefront of these initiatives, "green GDP" is an extension of the GDP to which monetarily expressed variables are added or subtracted.

Although several of these indicators monetarily assess the cost of the environmental degradation and resources depletion, they are not in themselves synonymous with sustainability. They do not explicitly indicate the distance which separates the current situation from a goal of sustainability. The Adjusted net savings (ANS) claims to bridge this gap. This sustainability indicator developed by the World Bank aims at measuring the net change in wealth over a year. Derived from the traditional measure of gross national savings (share of national income not consumed during the year), ANS deduces an estimate of the consumption of fixed capital, the estimate of the depletion of natural resources and damage due to global pollution. The current expenditures in education are added to reflect the investment in human capital. As in the Green GDP, the value of changes in wealth is monetarily valued. For its promoters, a negative ANS launches a signal of over-consumption of capital in relation to a goal of sustainability. It is nevertheless a great mistake.

In fact, these indicators assume that the various capitals can be substituted to one another. In doing so, they are part of a "weak sustainability" approach, where the physical constraints of the ecosystem, easily violated by investments and technological improvements, somewhat contribute to shape collective and individual behavior. Other indicators, like the Ecological Footprint, are based instead on stronger sustainability conceptions.

These radically different visions might explain that many advanced economies accumulate a huge ecological debt, according to their Foot Print, even though their ANS presents them as sustainable.

What monetary value to assign?

Both the "green GDP" and the ANS share a monetary unit of account. Summing monetary variables is often presented as a less arbitrary mode of aggregation than bringing together variables with assigned weights in a composite heterogeneous variable. Though, monetizing is often more questionable than explicit and democratic weighting.

First of all, currency means price. But giving a price to goods and services whose nature is not to be monetary exchange objects (domestic work or volunteer services, ecosystem services, etc.) is just as arbitrary as to grant them an explicit weight. Secondly, even in the case of market exchange, prices do not always take into account the whole costs for the society: for example, prices of goods that generate negative externalities underestimate these costs. Thus the economic value poorly or wrongly reflects social wealth. More fundamentally, can we reduce everything to a quasi-monetary value, with the risk, especially, of reducing the natural patrimonies of goods, gifts and activities to paid services? The choice to monetize is not neutral because in this choice the market is supposed to provide the central point for determining the monetary value and thus the price of activities and assets.

However, determining the well-being that goods and activities bring to the society is not the exclusive characteristic of markets! Other methods, much more democratic, are needed, opening up the possibility of assessing their positive or negative impacts, including environmental pressures through the ecological footprint.

The limits to monetizing the living

The biological richness is largely ignored by our indicators of monetary wealth. Strictly speaking, as a 2005 United Nations report said, "a country could devastate its forests and deplete its fisheries resources, this would only show an increase in GDP despite the obvious loss of natural capital" (Millennium Ecosystem Assessment, 2005). Some people, like the banker Pavan Sukhdev (2008), do not hesitate to say that this lack of monetary value of nature "is one of the underlying causes of its degradation."  With the monetary valuation (PES, Payments for Ecosystem Services), the ecosystem services become externalities since they provide benefits which are not paid for. Payments for ecosystem services fail to account for value in a broader sense, beyond monetary value, and obliterate other social and ecological qualities. Finally, giving payments for ecosystem services disregards ecosystems complexity in order to facilitate market transactions based on a single exchange value (and imposes a market-driven conservation for biodiversity).

Several studies have provided findings these last years. Following the Stern Report, which has been trying to assess the global warming medium and long-term cost, the Sukdhev report (commissioned by the European Commission), or also the Chevassus-au-Louis report (2009) (commissioned by the French Government), have recently supplied the news. The Sukhdev report estimated for example that the current changes of terrestrial and aquatic ecosystems, as a result of human activity, could eventually cost $ 100 billion a year and destroy 27 million jobs.

However, the process of giving a monetary value to nature finds its limits. The evaluation of actual services provided by nature, such as crop pollination by bees (that a group of researchers recently estimated at $ 150 billion per year, Gallai and al., 2009), might go on. But the process becomes more difficult in the case of values less directly related to production: how much, for example, is the estimated loss of a living species that has no market value, directly or indirectly? In order to answer this question, economists often use surveys based on the populations' willingness to pay: the estimated value is based on the average price that people interviewed are willing to spend, for example, for preserving a species or protecting a medium. These valuation methods are the subject of criticism (Milanesi, 2010).

Many aspects are very difficult (or impossible) to accurately assess with a monetary approach. This approach may thus be limited, still for a long time, to a utilitarian approach, focusing on its service to the human economy. However, the report of the Millennium Ecosystem Assessment (2005) is unambiguous in this regard: why we want to protect biodiversity will largely determine the degree of protection that we will choose. Non-utilitarian and non-monetary values set more ambitious conservation objectives than utilitarian values do. What we do for biodiversity is therefore a societal choice, not just an economic choice.

Correspondence address: georges.menahem@gmail.com  
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