Professional accountants are increasingly being asked to go beyond the more obvious functions and skills and consider environmental and social factors when measuring the impact of their advice. On a global scale, this relates to how governments and companies look and think about the way they measure success, typically through measures such as gross domestic product (GDP). The question is, however, whether this is an adequate indicator of success and appropriate comparator for national progress.
Chartered Accountants Australia and New Zealand is contributing to the debate with the release of our Future[inc] publication, Is Policy Making Measuring Up? Rethinking How We Measure the Success of a Nation. It discusses how a more complete picture of national progress can be shown, one which recognizes environmental and social outcomes as well as economic aspects.
Why we need to look beyond GDP
While measures of productivity and GDP are important and will continue to be, it would be remiss to just stop there. It is important to understand what society values as progress and ensure this is getting measured as well.
In 2012, the Australian Bureau of Statistics (ABS) undertook a review of what is most important to Australians, called the Measures of Australia’s Progress, which I participated in as a member of the Expert Reference Group. This review included consultation with governments, the community, and the business and education sectors. The key question that was asked was, What is important to you for national progress?
The findings showed that GDP growth did not feature as one of the values identified. However, values such as health, safety, environmental protection, peoples’ rights and responsibilities, and effective governance were featured. From this can we conclude that the maximization of GDP is not something in itself that people value?
Measuring what we value
GDP, at its core, is not a welfare measure; it is more a measure of economic activity. Some of the values identified in the ABS review correlate well with GDP but others have little or no connection to it. We need an approach of measuring national progress that takes into account GDP as well as what society values.
The answer to the question of what we value should be the driver of our choice of metrics for measuring national progress. The values identified in the review relate to four groups: society, governance, environment, and economy. GDP can be used to measure the goal of a sustainable economy, but it doesn’t relate to societal values, such as equal opportunity or managing the environment sustainably.
Our publication looks at additional measures different countries around the world use to better understand national progress from a more holistic perspective.
Future[inc] is Chartered Accountants Australia and New Zealand’s thought leadership initiative that contributes to macroeconomic discussions and public policy-making. For more information, visit charteredaccountantsanz.com/futureinc.