Toward a well-being economy

Traditionally, our policy and decision-makers use three basic measures of economic progress: gross domestic product (GDP), inflation rate, and unemployment rate.

But how useful are these economic measures, especially during this period when we are recovering from the COVID-19 pandemic? Can they guide us in using our natural assets, for example, our water bodies that provide food and means of transport, in our journey toward a RICH (Regenerative, Inclusive, Climate-smart, and Healthy) sustainable development that we, in the Climate Action and Sustainability Alliance (Casa), are advocating for?

Just like other countries, we use GDP to measure basic capital forms, and human capital is partly accounted for. But natural capital, which includes our rich marine biodiversity, is not included in GDP.

The two other basic economic measures—inflation rate and unemployment rate—give mixed signals in guiding our economy to move forward, due to various stimuli used by government to facilitate the recovery process and numerous economic disruptions to control the spread of the virus that has created havoc in industry and all societal activities.

Our current economic system and the measures of progress that we use are focused on capital that can be quantified and measured to produce monetary values that reflect our material growth. But we do not rigorously measure how such growth affects the well-being of our people and our natural capital. We try to do it, but not adequately.

We must now seriously develop the type of economy and the economic measures that will enable us to account for the well-being of our people and natural assets—a well-being economy (WE), the economy we need for sustainable recovery and growth.

New Economy and Measures of Progress

Clamor for WE is now growing globally. That’s an economy that “pursues human and ecological well-being instead of material growth.” This clamor is being spearheaded by the Well-Being Economy Alliance (WEAll)—a collaboration of organizations, alliances, movements and individuals.

The WE concept does not reject GDP although other economic measures to substitute for it are now increasingly being developed by various groups in different countries. Instead, it adds the measurement of the two other basic capital forms—human and natural capital—and focuses more on their well-being that, admittedly, may not be completely quantified and monetized.

Some quantifiable economic measures affecting human capital—for example, “household consumption of goods and services”—now exist. They can be quantified and measured with monetary values, which can then be added to GDP calculations. But the relationship of such measures to well-being of the people concerned, which is influenced by personal circumstances and lifestyle choices, can neither be fixed nor measured precisely.

Treatment of natural capital is as challenging, although it may be more easily done with scientific methods, for example, scientific measurement of changes in marine biodiversity.

What is clear is, in WE, we must consider with GDP other indicators that reflect social and environmental conditions. These indicators include the quality of governance that affects people’s freedom of choice. Some of these indicators, e.g., self-reports from self-assessment surveys (with simple questions, such as, how satisfied a person is with his life and what factors—income, health, education, etc.—make him feel so?) are subjective, while some are objective, e.g., household income. Interest to develop such indicators is now growing in some countries, for example, the gross national happiness in Bhutan.

WEAll’s vision is to achieve transition to WE in 10 years. The identification and definition of appropriate economic measures to cover the human and natural capital are most challenging. But we must do them. As the saying goes “We can’t manage what we can’t measure.”

Since the 1970s, when scientists, various organizations and even governments launched the movement on “Beyond GDP,” numerous alternatives have been proposed to include household work of women, environmental damages, and others. Some of them are single measures, such as the genuine progress indicator and some are referred to as “dashboards,’ such as the 17 Sustainable Development Goals.

After about 50 years, GDP remains as the main economic measure due to several factors that I shall discuss at the webinar that the Center for Strategy, Enterprise and Intelligence (CenSEI) is holding on Monday at 1 p.m. We shall announce the link to the recording in the Facebook group of Casa.

Sample WE Initiative

Since most of our readers are in business, I will cite a sample WE initiative in business—circular production, the heart of a Circular Economy (CE).

Our circular economy follows a linear process where raw materials, which are usually extracted from nature, are processed into products, with some waste, then used and discarded to produce more waste. One report in the literature estimates that “over 300 million personal computers are discarded each year, resulting in significant environmental damage from lead and mercury.”

In contrast, WE follows a circular process, which starts with a design that avoids waste and pollution, reduces materials and energy usage in production, and helps regenerate the natural ecosystem.

Two examples of WE businesses in our country that practice circular production—as well as attend to the well-being of their human capital, their employees, and of their natural assets, trees, weeds, etc. in their environment—are Flor’s Garden in Antipolo and Nurture Wellness Village in Tagaytay. Their business strategies and activities effectively cover both their human capital and natural capital—from the design of services they offer to the local production of vegetables and herbs in the food they serve to their customers.

The next step is to develop quantifiable measures for such WE strategies and initiatives so that they may be included in economic measurement of progress.

WE Economy basic initiative

Casa, through our group on Recovering with Nature, co-chaired by newly elected MAP Governor and former Socioeconomic Planning Secretary Ciel Habito and Atty. Ipat Luna, former Department of Environment and Natural Resources official, worked with Deputy Speaker Loren Legarda on the Philippine Ecosystem and Natural Capital Accounting System (House Bill No. 9181, or the Pencas Bill or). This supports the UN SEEA (System of Environmental-Economic Accounting), which the Philippine Statistical Authority has started to implement. It also identifies the government agencies and sectors that must participate in undertaking the identification, valuation, and accounting of our natural capital—the ecosystems and services they provide.

We must support and promote the early approval of Pencas and, thereafter, help in performing those tasks—from identification to accounting of our natural capital—so that we can measure its growth or depreciation. But we must attend as well to our human capital and develop proper economic measures for them. INQ

This article reflects the personal opinion of the author and not  the official stand of the Management Association of the Philippines (MAP). The author is convenor-chair of Climate Action & Sustainability Alliance (CASA) and serves as board director of organizations on climate change, sustainable development, science and technology, education and communication.