Speaker 2015

Michael GreenEconomist and expert on social progress, author of several books on the future of capitalism.

How to measure progress

Economist Michael Green is the Executive director of the Social Progress Index (SPI) and the author of several books on the future of capitalism. Green’s organization focuses on redefining the way we quantify progress in the world, measuring society across dimensions and indicators that actually matter: basic human needs, foundations of wellbeing, and opportunity. The SPI is an effort to complement the measure of national performance using only traditional economic measures such as GDP, and has been adopted widely around the world since its launch two years ago. Previously, Green worked for the UK Government and taught economics.

Keynote Speech on Video

“Investing in the wellbeing of a population can be an economic growth driver”.

Report : How to measure progress

If there is one indicator considered an absolute benchmark in the economic field, that would definitely be the GDP that first emerged in 1934 in the United States and has served ever since as a measure of nations’ performance. Today, the very concept of GDP is being called into question for the simple reason that it omits to take account of the notion of social wellbeing, a factor that should in fact be enhanced as a consequence of the creation of wealth. This stance is advocated by Michael Green who has developed his own “tool”, the Social Progress Index. Now…

If there is one indicator considered an absolute benchmark in the economic field, that would definitely be the GDP that first emerged in 1934 in the United States and has served ever since as a measure of nations’ performance. Today, the very concept of GDP is being called into question for the simple reason that it omits to take account of the notion of social wellbeing, a factor that should in fact be enhanced as a consequence of the creation of wealth. This stance is advocated by Michael Green who has developed his own “tool”, the Social Progress Index. Now preferred by many countries as a complement to the GDP and based on 52 indicators, the SPI for example no longer merely considers the health expenditure of a given economy, but instead the life expectancy of its population: an iconoclastic and very welcome approach.

Is there life after – and beyond – Gross Domestic Product? That is in substance the question asked by the economist Michael Green in turning the spotlight on a very new index whose relevance is bound to strike all those who examine it: the Social Progress Index (SPI). Currently at the head of the Social Progress Imperative, an organization tasked with developing this index launched in 2013, Michael Green explained to participants at the Forum de la Haute Horlogerie some of the reasons that make it an inescapable new measure of society.

First, he took a brief look back to the 1930s, when the economist Simon Kuznets published a tiny book that would change our way of looking at the world. This study, titled National Income 1929-32, was certainly not in his mind intended to become a benchmark for economic growth, but rather a means of helping governments manage their economies. Managing rather than measuring was the advice of the economist who was careful to issue this warning: “The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income as defined above.” It turns out that nobody listened to this warning and that GDP has become the measure of economic growth and, by extension, of a country’s success.

But is GDP really the most relevant means of measuring the progress – and thus the welfare – of a nation? Many groups have addressed this topic in recent years, while putting forward a number of alternative measures. The question has in fact become rhetorical and the obvious answer is “no”. So all that remained was to find a new way of looking at things, far removed from the pure maths of GDP which, as Michael Green noted “counts new bombs and more prisons as progress”. A social progress index therefore needed to be envisaged, an indicator that would take account solely of environmental and social data. Given this characteristic, the SPI was clearly intended to be different from other indicators such as the UN’s Human Development Index (HDI) or Bhutan’s Gross National Happiness (GNH). According to Michael Green, another key element underpinning the creation of the SPI was the fact that “the index is grounded on the idea that what we measure directs the choices we make”. In addition, the initiators of the project chose to base the index on actual results rather than evaluating States’ efforts because, as the economist explained, “there is for example not necessarily any correlation between health expenditure and the quality of health care. That’s why measuring expenditure does not always make sense. Results are often more significant.”

A myth crumbles

This new index capable of revealing another measure of States’ reality is calculated according to three fundamental concepts: basic human needs (nutrition, access to water, basic medical care, shelter…); the foundations of wellbeing (access to knowledge, to information, to health…) and opportunities for fulfillment (personal rights, freedom of choice, access to advanced education, tolerance…).

So far, 133 countries have been examined on the basis of this new index and the findings are highly instructive. Norway heads the rankings, followed by Sweden, Switzerland, Iceland and New Zealand, while right down at the bottom of the table are Afghanistan, Chad and the Central African Republic. But above and beyond this ranking, which already provides a valuable picture of the social reality of a given state, the SPI is all the more noteworthy when compared with other economic indicators. In making such comparisons, one discovers that the SPI level does not correlate to the wealth of a nation – witness New Zealand whose measured level of social progress is equivalent to that of Norway despite an almost two times lower GDP. Conversely, Russia, China and India do not transform all their wealth into wellbeing, whereas Rwanda, Costa Rica and New Zealand all show SPI results far higher than their respective economic situations might lead one to imagine.

The other major finding revealed by the SPI is that beyond a certain threshold, once basic needs have been satisfied, there is no correlation between economic growth and social progress. In other words, each additional GDP dollar only marginally contributes to social wellbeing. To the point that several studies have shown that the world per capita GDP could rise from 14,000 to 23,000 dollars by 2030, yet the mean global SPI is expected to show only very modest growth during the same period, rising, from 61 to… 62.4! That is exactly why advocates of the SPI are encouraging all States to think differently and to direct their policies towards more social progress. And Michael Green wrapped up his talk with this conclusion: “Investing in the wellbeing of a population can be an economic growth driver. The SPI shatters the myth which holds that economic activity creates growth and that everything related to social progress costs money.”

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