the measure of wealth

Maryland is leading the nation in two subtle but paradigm-shifting ways. Yet it is getting few kudos in the general media for either initiative, probably because they are a bit geeky and certainly technical.

Still, underneath all the technicalities, these innovations are founded upon the belief that money should work to make this world a place where the environment, the economy and the human spirit are all able to thrive. These innovations change the way we think about money and the marketplace.

They are the adoption of the GPI (Genuine Progress Indicator) and the legal recognition of B-Corporations (Benefit Corporations).

I do not pretend to be an expert in either, but will tell you what I know, why I am a booster of both, and give you links to explore these concepts more.

Currently, states (as well as most nations) measure their well-being by the flow of money through the system, specifically, "the market value of all final goods and services made within the borders of a country in a year."

This is measured as the GDP (Gross Domestic Product). The more stuff we make and the more services we offer, the better off society is. Or so current mainstream thinking goes. (Again, this is coming from a person much more comfortable with letters than numbers, so I encourage you to refine your understanding of these concepts by pursuing additional research.)

The problem with the GDP is that it is indiscriminate. That is, it measures the flow of money to pay for society's ills as well as its goods. If you break your leg and go to the hospital and have surgery to set and fix it, that is good for the GDP.

If cities have to pay millions of dollars for metal detectors and security guards in the schools because the level of youth violence has turned the arena of learning into a war zone, that is good for the GDP.

The GDP is not a bad measurement if you want to measure how much a society is producing in goods and services. That is a useful and helpful tool. Where it fails is as an indicator of social well-being. But that is what it is mistakenly being used for. It does not tell us how healthy people are, how happy or well-paid or under-paid they are, what resources people have access to, how equitably the goods, services, or wealth are distributed throughout the society.

In recent years, a handful of economists have put forward alternative ways of measuring the well-being of society. One of the most promising is the GPI, the Genuine Progress Indicator. http://en.wikipedia.org/wiki/Genuine_progress_indicator

This model measures many kinds of goods and bads of a society, in monetary terms. Or as the wikipedia article puts it, it is as if the GDP measures the gross profit of society and the GPI measures the net profit. That is, in addition to the income side, the GPI will place on the expense side of the balance sheet the loss of productivity for the time you are in the hospital and loss of learning and freedom in the schools. It will calculate the monetary value of non-monetary jobs and exchanges. So, housework, voluntarism, the benefits of the environment in scrubbing the air and water of our pollutants, etc. are included in the GPI.

Then it will wrap this all up in numbers that tell us how well we are doing as a society, not just as a marketplace.

Wonderfully, this past winter, Maryland became the first state in the nation to incorporate GPI measurements into its official state evaluation. This is helping us change the narrative of, and thus our cultural attitude toward, the place of money in our society, and how we measure its goodness and value. Ultimately, after all, our economy should serve to enhance the welfare of the people, not the people serve to grow corporations.

The GPI is immensely useful, and despite the geekiness of its metrics, its story, its underlying message, is one we should all work to understand. Here is the MD GPI website that gives us a headstart:


www.green.maryland.gov/mdgpi/mdgpioverview.asp

So as not to make this post too long, I will write about B-Corporations in my next post. Know for now that Governor O'Malley just this week signed into law a bill making Maryland the first state in the nation to recognize the legal status of B-Corporations. That bill passed unanimously through the Senate and 135-5 in the House. It will change the way businesses can do business. Kudos to all.