What is the most important number of your lives? This question was posed to heads of state and the brightest minds in academia during a discussion titled More Than GDP at the 2019 World Economic Forum.
Given the members of the group, one would expect them to tout an economic growth narrative—with statistics reporting GDP growth year over year. But this wasn’t the case.
The responses were much more personal and varied between dates of historical significance to statistics on gender equality, and educational attainment, while others placed value on welfare and well-being.
“GDP isn’t our driving force,” answered New Zealand Prime Minister Jacinda Ardern who was among the panelists. She explained that most world leaders, regardless of where they are on the political spectrum, can be distilled down into increasing the well-being of their people.
She isn’t alone. For years now there has been a global paradigm shift from a hardline focus on economic well-being to prioritizing economic policy frameworks and metrics focused on societal well-being. What does this mean exactly? To explain this, let us first understand what GDP is and isn’t.
What GDP is. The modern concept GDP is hailed as one of “the greatest inventions of the 20th century”. Developed post the Great Depression by prize winning economist Simon Kuznet, the Gross Domestic Product measures the monetary value of final goods and services—that is, those that are bought by the final consumer—produced in a country in a given period of time (for example, in a quarter of a year). Or to put it simply, GDP measures the size of the economy and how it’s performing.
Now, what GDP isn’t. GPD isn’ta measure of welfare, or in this case temperature reading on societal well-being. In fact, GDP actually increases with rising inequality in healthcare and education, and reconciles environmental degradation as valuable. Worst of all, GDP is a direct beneficiary of world wars and political unrest.
Today GPD isn’t the measurement by which citizens evaluate their country’s respective economic progress. According to a WEF Inclusive Development Index, citizens consider economic progress as a multidimensional improvement in living standards, including increasing income, economic security, employment opportunities, and quality of life.
Globalization has dethroned GDP, rendering it too narrow a measurement. Perhaps dethroned is too strong a word; however, globalization has granted citizens and world leaders unprecedented access to data and analytics. Armed with this information and likely a smart-phone, today citizens amplify their voice through digital platforms, demanding action that directly affects their families, wallets, and overall quality of life.
Governments who choose to lead with GDP and turn a blind eye to the values and welfare of the commonwealth likely risk losing their citizens trust, and this will have national economic consequences of vast proportions.
It’s time to reevaluate and to redesign global economic growth models. And quickly. According to the 2018 Global Trust Barometer published by PR powerhouse Edelman Communications, public confidence in institutions such as government and big business remains at an all-time low. In fact, they also report a continued increase of distrust.
Alternatives to GDP
The path forward for government and policymakers isn’t straightforward. Since, the United Nations launched the Human Development Index in 1990 (which measures such factors as education, gender equality, and health) there’s been at least a half a dozen indices titled “How’s Life?”, “How Happy is our Population?” and “What Matters Most to People Around the World”, in addition to a plethora of others focused on well-being aspects such as health, education, peace, and prosperity.
While they all have slightly differing objectives and world views—and audiences for that matter—perhaps the most relevant index or well-being lens for the current state of the world was launched by the World Economic Forum approximately two years ago.
Known as the Inclusive Development Index (IDI), it examines advanced and emerging economies against a backdrop of nine indicators broken into three categories: growth and development; inclusion; intergenerational sustainability, and equity. These indicators as noted by the architects of this framework, highlight a country’s unexploited potential to simultaneously increase economic growth and inclusion.
One example of such is the United States. In IDI’s 2018 Index, the United States received an overall ranking of 23 out of 29 among the G7 countries. When measured against the backdrop of the indicators, the U.S. ranks 10th out of the 29 advanced economies on Growth and Development (which measure GDP, healthy life expectancy, and productivity) but 26th on Intergenerational Equity and Sustainability and 28th on Inclusion.
Put simply, U.S. policymakers need to focus on reducing poverty. Currently, U.S. poverty stands at 16.3 percent—the second highest among developed economies. Parallel to poverty, income inequality takes the top-ranking spot in its category.
U.S. metrics, as well as others can be actionable and produce economic gains as highlighted in IDI’s 2018 report. When socioeconomic issues were addressed, overall rankings improved. Rankings also saw a steady growth in the development sub category.
Turning Theory into Action
Turning theory into action is critical for the mass adoption of this new formula by economic policymakers. However, to do so will certainly require governments, economists, and journalists alike to rethink a century’s worth of economic theory in exchange for progress.
That transition will be difficult to make for some leaders, however, New Zealand Prime Minister Jacinda Ardern is certainly embracing the challenge.
Ardern (at age 37 is the youngest prime minister of her country) charged the treasury to produce a “well-being budget” for 2019. The budget was built around four metrics: natural, capital, social, and financial. It was inspired by The Living Standard Framework, a paper that predates Ardern and consults institutions on policy trades offs that are likely to affect the well-being of their people.
New Zealand isn’t alone in their pursuit. The United Arab Emirates is following alongside, boldly taking their citizen’s happiness in their charge. In February 2016, the UAE Government created the post of Minister of State for Happiness and appointed Her Excellency Ohood bint Khalfan Al Roumi as the Minister. Her main responsibility was to harmonize all government plans, programs, and policies to achieve a happier society.
In the years ahead, research coming out of pioneering governments like New Zealand and UAE will produce unique insights to inform policy on new growth models, allowing progressive governments to amplify well-being and creating new paths to a more comprehensive understanding of the GDP. The cost governments and leaders face by remaining apathetic to new and changing economic models could prove internally disastrous and greatly risk them getting left behind.
About the author: Becky Graham is the founder and president of GenYize, a social enterprise focused on developing workforce capabilities through dynamic learning ecosystems in the age of digital change.
But it’s difficult to think about value when we have no buoy for understanding it outside our traditional lenses: for example, our time, our job, and what others tell us they are worth in cash. This, largely, is the world’s paradigm for value so far. But understanding what value really means changes everything—and will be at the center of the decentralized revolution in global coordination that will unfold over the next decade. So, where do we begin?
Let’s start with gold.
Gold is an inherent value. When backing a market, gold allows us to grow a balanced economy well into the trillions. But why does it allow for massive stable markets to form around it? It is gold's permanence that creates stability. We understand that gold will always have value, because it is inherent in all of us, not just in one part of the world, but everywhere, not just today, but tomorrow and for the long haul.
In the 1930s when the gold standard was removed, we learned that the U.S. dollar didn’t need gold to back its economy to flourish. We learned that it was just a symbol for U.S. citizens to decentralize their coordination around the United States economy.
It turns out, common agreement is a philosophy for building shared economy.
And so it seems inherent value is a marker for us to begin exploring what the future could look like—a future beyond gold and the existing realm of credit. And so what else has inherent value? Is education as valuable as gold? What about healthcare? What about a vote that can’t be tampered with? What about an ID that can’t be stolen or erased? What about access to nutrition or clean water? You will find value everywhere you look.
It turns out, we’ve already done the legwork necessary to uncover the most elemental inherent values: The Sustainable Development Goals are commitments grown out of the drive to bring to life basic tenets of the Universal Declaration of Human Rights—the closest possible social contract we have to a global, common agreement.
We’ve already agreed.
Our agreements are grounded in deep value centers that are globally shared, but undervalued and unfulfilled. The reason for this is our inability to quantify intangible value. All of these rich, inherent values are still nebulous and fragmented in implementation—largely existing as ideals and blueprints for deep, globally shared common agreement. That is, we all agree education, health, and equality have value, but we lack common units for understanding who and who is not contributing value—leaving us to fumble in our own, uncoordinated siloes as we chase the phantoms of impact. In essence, we lack common currencies for our common agreements.
Now we find ourselves at the nexus of the real paradigm of Blockchain, allowing us to fuse economics with inherent value by proving the participation of some great human effort, then quantifying the impact of that effort in unforgeable and decentralized ledgers. It allows us to build economic models for tomorrow, that create wholly new markets and economies for and around each of the richest of human endeavors.
In late 2017 at the height of the Bitcoin bubble, without individual coordination, planning, or the help of institutions, almost $1 trillion was infused into blockchain markets. This is remarkable, and the revolution has only just begun. When you realize that Blockchain is in a similar stage of development as the internet pre-AOL, you will see a glimpse of the global transformation to come.
Only twice in the information age have we had such a paradigm shift in global infrastructure reform—the computer and the internet. While the computer taught us how to store and process data, the Internet built off that ability and furthered the conversation by teaching us how to transfer that information. Blockchain takes another massive step forward—it builds off the internet, adding to the story of information storage and transfer—but, it teaches us a new, priceless and not yet understood skill: how to transfer value.
This third wave kicked off with a rough start—as happens with the birth of new technologies and their corresponding liberties. Blockchain has, thus far, been totally unregulated. Many, doubtless, have taken advantage. A young child, stretching their arms for the first couple times might knock over a cookie jar or two. Eventually, however, they learn to use their faculties—for evil or for good. As such, while it’s wise to be skeptical at this phase in blockchain’s evolution, it’s important not to be blind to its remarkable implications in a post-regulated world, so that we may wield its faculties like a surgeon’s scalpel—not for evil or snake-oil sales, but for the creation of more good, for the flourishing of commonwealth.
But what of the volatility in blockchain markets? People agree Bitcoin has value, but they don’t understand why they are in agreement, and so cryptomarkets fluctuate violently. Stable blockchain economies will require new symbolic gold standards that clearly articulate why someone would agree to support each market, to anchor common agreement with stability. The more globally shared these new value standards, the better.
Is education more valuable than gold? What about healthcare or nutrition or clean water?
We set out in 2018 to prove a hypothesis—we believe that if you back a cryptocurrency economy with a globally agreed upon inherent value like education, you can solve for volatility and stabilize a mature long lasting cryptomarket that awards everyone who adds value to that market in a decentralized way without the friction of individual partnerships.
What if education was a new gold standard?
And what if this new Learning Economy had protocols to award everyone who is helping to steward the growth of global education?
Education is a mountain. Everyone takes a different path to the top. Blockchain allows us to measure all of those unique learning pathways, online and in classrooms, into immutable blockchain Learning Ledgers.
By quantifying the true value of education, a whole economy can be built around it to pay students to learn, educators to create substantive courses, and stewards to help the Learning Economy grow. It was designed to provide a decentralized way for everyone adding value to global education to coordinate around the commonwealth without the friction of individual partnerships. Imagine the same for healthcare, nutrition, and our environment?
Imagine a world where we can pay refugees to learn languages as they find themselves in foreign lands, a world where we can pay those laid off by the tide of automation to retrain themselves for the new economy, a world where we can pay the next generation to prepare themselves for the unsolved problems of tomorrow.
Imagine new commonwealth economies that alleviate the global burdens of poverty, disease, hunger, inequality, ignorance, toxic water, and joblessness. Commonwealths that orbit inherent values, upheld by immutable blockchain protocols that reward anyone in the ecosystem stewarding the economy—whether that means feeding the hungry, providing aid for the global poor, delivering mosquito nets in malaria-ridden areas, or developing transformative technologies that can provide a Harvard-class education to anyone in the world willing to learn.
These worlds are not out of reach—we are only now opening our eyes to the horizons of blockchain, decentralized coordination, and new gold standards. Even though coordination is the last of the seventeen sustainable development goals, when solved, its tide will lift for the rest—a much-needed rocket fuel for global prosperity.
“Let us raise a standard to which the wise and the honest can repair.” —George Washington