Hazel Henderson:

Healthier communities and "economism"

For a particular enterprise, we typically use profit or return on investment rather than market share, or broader measures of the usefulness and health of an enterprise. We exclude environmental damage, stress on workers or risk to consumers from the costs of things, until they get turned into dollars by suits or regulatory action. For measure the health of not-for-profits by margin, rather than by broader measures of their effectiveness in accomplishing their missions.

For the nation, we use gross national product (GNP), or gross domestic product (GDP), depending on which is doing better at the moment. GNP is a simple aggregation of all American money income, while GDP is limited to income from domestic sources. Neither attempts to measure what that income contributes to the health and wholeness of the nation. A stabbing adds to the GNP, because of the value of the emergency and medical services expended on the victim. The damage done to the victim does not have a dollar value. Similarly, an environmental disaster contributes to GNP, as does a frivolous lawsuit, or an unnecessary surgery. A low-weight premie adds much more to the GNP than does the outreach and nutritional counseling that would have prevented it.

This shift in thinking is not impossible. I always thought that my work in critiquing economic theory would never make any sense to anyone until long after I was dead. But these alternative indicators that I have long advocated are gradually replacing the assumption that growth in GNP is the only significant indicator. At the 1992 Rio de Janeiro Conference 178 governments -- including ours -- agreed to re-calculate the GNP to take social and economic costs into account. There has been a lot of effort at the UN to extend all these ideas of re-defining human development. Earth Day 1994 is focused on the need to change the score card.

Some communities have fought the gap between macroeconomic indicators and the community reality by inventing alternative local currencies and systems of exchange. This is a leading indicator of the failure of the macroeconomic system. When the national government and central banks that don't manage that well, you get local banks vacuuming out people's deposits. The local communities end up with a currency deficit when their local return on investment can't compete with the return elsewhere in the world. To get funds for local use they re-invent local exchange, inventing limited-purpose local money. Some places keep track of exchange credits on local computer bulletin boards. The dentist does trades with the accountant, and so on.

This enables a community to have an alternative, complimentary economy. People have their community accounts in one pocket, pounds or dollars or francs in the other. Ithica, New York has good working model of this going. Joe's Restaurant says it will accept 30 percent of the tab in Ithica money and 70 percent in U.S. dollars. The guy down the street wants to compete, so he says he'll take 50 percent in Ithaca credits, and so forth. Som municipalities use volunteer credits to give people free seats on the buses, for instance.

The concept that I call "economism" -- reducing every value to its cash equivalent and using GNP as the sole measure of how well we are doing -- got started in the U.S. and other industrial countries after World War II. During the war the Allies had put together various concepts of national accounts and came up with GNP. The purpose of this measure was to maximize war production. Naturally, this came at the expense of all other ways of measuring things. Yet this skewed measurement has become the single arbiter of global wealth and progress.

It has never been fundamentally re-examined. It values, for example, bombs and bullets since they are things that are produced for money. It does not value the environment. It values salaries paid to teachers, but it does not value what people know -- how educated they are. It places no value on "human capital," meaning people. It does not even place a value on the public infrastructure.

Starting with the Employment Act of 1946, the U.S. government committed itself to creating full employment and fostering continual growth of GNP. In doing this, we confused the means with the ends. The end really was human development of society, but no one looked at the means and the formula for development that it assumed: maximizing GNP

There were deep assumptions behind that commitment: for instance, that economic growth measured by GNP, which is simply the country's aggregate money income from all sources domestic and foreign, would create jobs for workers, would trickle down into the economy, and create new growth.

The practitioners who brought us these assumptions were economists. They said, "We know how to do this. We have the recipe for heaven on earth, for the proverbial `rising tide that will lift all boats.' They believed that on balance, the GNP measurement would benefit everyone.

Instead is has become like a cancer, like a malfunctioning DNA strand in the cultural code.

Now finally we are addressing this issue in many countries, attempting to splice in a healthier strand of DNA, so that we can develop in more normal way, not simply seeking a very narrow development of a few economic variables, but broadening the net to pick up other values.

The economists continue to say it's too difficult. They say, "We don't know how to do this yet. We'll need another million for our institute to study the problem." For them it's just a way to get more perks. The economists say, "We'll go in the back room and put weightings on the data to decide if the number of parks or the level of infant mortality, for instance, is more important." But people now are going with idea of unbundled indicators, so people can decide for themselves what's important.

We are beginning to break the hammer lock of economism. We are beginning to recognize statistical junk food for what it is.