Estimating the Genuine Progress Indicator (GPI) for Brazil from 1970-

2010

Daniel Caixeta Andrade (UFU, Brazil)Junior Ruiz Garcia (UFPR, Brazil)

Araraquara-SP, September 2015 1

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OUTLINE Main objective and context

Rationale for the GPI calculation

Methods

Results

Policy implications

Final remarks

Main objective:

Estimate the Genuine Progress Indicator (GPI) for Brazil from 1970 to 2010:

To what extent Brazil has experienced genuine progress over 1970-2010?

Brazil: intense GDP growth throughout the 20th century: 7th largest economy in terms of GDP;

Brazilian GDP growth: has not increased the living standards of most Brazilians Brazil has one of the most unequal societies in the world.

One of the most fascintating ilusions of modern industrial civilization is the confusion between growth and development

“Growth in GDP is a means to an end. Hopefully, it brings with it a better life for the masses. Yet, unless GDP growth raises general living standards, true ‘development’ does not take place” (Back, 1994, p. 631).

“The most unforgivable sin of development planners is to become mesmerised by high growth rate in GDP and to forget the real objective of development” (Haq, 1976, p. 24)

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Development as Freedom

(Amartya Sen)

Development is a process of steadly increasing people´s choices in order to

allow them to exercise their freedoms.

This process must me achieved in a RESILIENT WORLD.

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The current Macroeconomic Regime

To prevent the endogenous crisis of capitalism through active economic policies that stimulate economic growth

Lord Keynes (1883-1946)

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The capitalism system and its instability

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The birth of GDP as the primary metric of economic growth

We needed an universal accepted indicator to monitor the economic performance of nations.

Simon Kuznets (1901-1985)

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Size should not be the most glorified attribute ....

Rationale for the GPI calculation:

GPI: modern version of the ISEW (Daly and Cobb, 1989);

GPI: alternative index to GDP;

GPI: comprises a set of monetarily valued items distributed into three domains (economic, social and environmental);

GDP: main limitation is the lack of accounting for the costs (social and enviromental ) of a growing economy;

Rationale for the GPI calculation:

GDP: has been errousneoly considered a measure of progrees “time to leave GDP behind” (Costanza et al., 2014) and “beyond GDP” initiatives; Costanza et al., Nature

January 2014

GPI: embraces the challenge of better understanding the side effects of a growing economy;

GPI: supported by ecological economists may be a realiable indicator for the optimal macroeconomic scale and the uneconomic growth

The “threshold hypothesis” (Max-Neef, 1995; Lawn & Clarke, 2010).

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Uneconomic growth is a real possibility under the ecological-economic perspective

We need to identify the sustainable scale and the macroeconomic optimal scale

What should be taken into account when assessing the progress of nations?

The GPI in a global perspective

“While global Gross Domestic Product (GDP) has increased more than three-fold since 1950, economic welfare,as estimated by the Genuine Progress Indicator (GPI), has actually decreased since 1978.” (Kubiszewski et al., 2013)

The GPI in a global perspective

Source: Kubiszewski et al., 2013

The GPI in a global perspective

Source: Kubiszewski et al., 2013

Item Domain Contribution to GPIConsumption expenditure Economic PositiveDefensive and rehabilitative expenditures Economic NegativeExpenditures on consumer durables Economic PositiveServices from consumer durables Economic PositiveIncome distribution index Economic Positive/negativeWelfare generated by publicly-provided infrastructure

Economic Positive

Value of non-paid household labour Social PositiveValue of volunteer labour Social PositiveCost of unemployment and underemployment Social Negative

Cost of crime Social NegativeCost of family breakdown Social NegativeChange in the foreign debt position Social Positive/negativeCost of non-renewable resource depletion Environmental NegativeCost of lost agricultural land Environmental NegativeCost of timber depletion Environmental NegativeCost of air pollution Environmental NegativeCost of waste-water pollution Environmental NegativeCost of long-term environmental damage* Environmental NegativeGenuine Progress Indicator (GPI) Sum of itemsPopulation Per capita GPI GPI ÷ population

Items typically used to calculate the GPI

Methods:

Brazilian GPI: followed the traditional approach with minor deviations (data shortage) 17 items

Economic domain: CONtotal (private and public); DRE; DI; WPPI ADJ_CONweighted

Social domain: LABOURhousehold; LABOURvolunteer ; COSTunemployment ; COSTcrime ; COSTfamily; DEBT

Environmental domain: COSTnon-renewable; COSTland ;

COSTtimber; COSTair ; COSTwater; COSTlong-term_damage

LNCS: equal to the sum of all items in the environmental domain weighted by the EHI.

Results:

Year

Real GDP (billion reais

at 2010 prices)

Real GPI (billion reais

at 2010 prices)

Per capita real GDP(reais at

2010 prices)

Per capita GPI

(reais at 2010 prices)

Per capita real GDP

(Index value: 1970 = 100.0)

Per capita GPI

(Index value: 1970 = 100.0)

1970 783.52 413.03 8,156.51 4,299.68 100.00 100.001971 872.02 449.35 8,859.44 4,565.28 108.62 106.181972 977.12 480.26 9,692.41 4,763.91 118.83 110.801973 1,113.71 502.98 10,788.74 4,872.51 132.27 113.321974 1,214.41 526.58 11,489.92 4,982.17 140.87 115.871975 1,277.67 525.47 11,806.25 4,855.60 144.75 112.931976 1,402.76 565.76 12,659.32 5,105.73 155.21 118.751977 1,467.37 588.14 12,933.49 5,183.87 158.57 120.561978 1,514.79 621.22 13,040.48 5,347.93 159.88 124.381979 1,617.29 640.25 13,599.34 5,383.68 166.73 125.21

Real GDP, real GPI, per capita GDP, and per capita GPI: Brazil, 1970-1979

Results:

Real GDP, real GPI, per capita GDP, and per capita GPI: Brazil, 1980-1989

Year

Real GDP (billion reais

at 2010 prices)

Real GPI (billion reais

at 2010 prices)

Per capita real GDP

(reais at 2010 prices)

Per capita GPI

(reais at 2010 prices)

Per capita real GDP

(Index value: 1970 = 100.0)

Per capita GPI

(Index value: 1970 = 100.0)

1980 1,764.64 698.49 14,495.10 5,737.53 177.71 133.441981 1,687.11 684.57 13,539.06 5,493.70 165.99 127.771982 1,696.90 705.92 13,306.39 5,535.49 163.14 128.741983 1,639.04 627.95 12,563.98 4,813.49 154.04 111.951984 1,725.41 604.68 12,937.54 4,534.05 158.62 105.451985 1,862.50 618.94 13,672.46 4,543.54 167.63 105.671986 2,011.29 799.64 14,467.25 5,751.86 177.37 133.771987 2,083.68 663.02 14,697.89 4,676.78 180.20 108.771988 2,081.55 567.04 14,409.88 3,925.41 176.67 91.301989 2,149.81 548.15 14,616.73 3,726.91 179.20 86.68

Results:

Real GDP, real GPI, per capita GDP, and per capita GPI: Brazil, 1990-1999

Year

Real GDP (billion reais

at 2010 prices)

Real GPI (billion reais

at 2010 prices)

Per capita real GDP

(reais at 2010 prices)

Per capita GPI

(reais at 2010 prices)

Per capita real GDP

(Index value: 1970 = 100.0)

Per capita GPI

(Index value: 1970 = 100.0)

1990 2,057.37 717.10 13,748.01 4,791.93 168.55 111.451991 2,088.48 744.26 13,726.11 4,891.47 168.28 113.761992 2,078.72 745.50 13,446.00 4,822.18 164.85 112.151993 2,175.70 709.47 13,856.98 4,518.59 169.89 105.091994 2,291.76 798.72 14,374.45 5,009.78 176.23 116.521995 2,392.98 1,020.18 14,781.46 6,301.64 181.22 146.561996 2,444.43 1,041.99 14,869.49 6,338.40 182.30 147.421997 2,526.93 1,071.84 15,138.08 6,421.06 185.60 149.341998 2,527.83 1,077.15 14,915.87 6,355.92 182.87 147.821999 2,534.29 1,074.31 14,733.69 6,245.73 180.64 145.26

Results:

Real GDP, real GPI, per capita GDP, and per capita GPI: Brazil, 2000-2010

Year

Real GDP (billion reais

at 2010 prices)

Real GPI (billion reais

at 2010 prices)

Per capita real GDP

(reais at 2010 prices)

Per capita GPI

(reais at 2010 prices)

Per capita real GDP

(Index value: 1970 = 100.0)

Per capita GPI

(Index value: 1970 = 100.0)

2000 2,643.41 1,056.09 15,148.05 6,051.94 185.72 140.752001 2,678.17 1,131.94 15,133.60 6,396.27 185.54 148.762002 2,749.30 1,150.11 15,325.49 6,411.08 187.89 149.112003 2,780.83 1,176.99 15,300.03 6,475.79 187.58 150.612004 2,939.72 1,237.97 15,975.85 6,727.75 195.87 156.472005 3,032.51 1,292.84 16,291.33 6,945.41 199.73 161.532006 3,152.46 1,370.61 16,756.41 7,285.25 205.44 169.442007 3,344.61 1,439.51 17,603.50 7,576.49 215.82 176.212008 3,517.51 1,516.35 18,342.74 7,907.30 224.88 183.902009 3,505.96 1,662.93 18,119.50 8,594.34 222.15 199.882010 3,770.09 1,676.06 19,312.96 8,585.94 236.78 199.69

Results:

Annual growth rates over 1970-2010: 3.6% (GPI) and 1.7% (per capita GPI)

Results:

GPI-GDP ratio: 0.53 in 1970 and 0.44 in 2010

Results:

1970s: best decade in terms of per capita GDP growth but not in terms of per capita GPI growth;

1980s: ‘lost decade’ in Brazil negligible growth in per capita GDP and 35% decline in per capita GPI;

1980s: uneconomic growth due to socio-political and institutional factors;

1990s and 2000s: per capita GPI increased at a faster rate than per capita GDP.

Policy implications (PI):

Per capita GPI in Brazil: overall growth despite the increase in social and environmental costs;

Per capita GPI in Brazil: non-ideal pattern of growth marginal costs of GDP growth have accelerated over the study period;

PI # 1: immediate offical adoption of GPI as to monitor externalities provoked by growing the economy;

PI # 2: foster investment in critical infrastructure;

Policy implications (PI):

PI # 3: consolidate improvements in the distribution of income and wealth;

PI # 4: curb the social costs: fight crime events and protect family integrity;

PI # 5: absolute necessity of limiting the material and energy use as to keep the rate of physical throughput within the resilience threshold;

PI # 6: improve material and energy efficiency;

PI # 7: ecological tax reform.

Final remark:

What does the Brazil GPI study tell us?

Overall, genuine progress has been achieved, but in a non-ideally way. The marginal costs related to the growing Brazilian economy are huge and may

outweigh the marginal benefits in the near future.

Thank you for your

attention!Contact info:

Daniel Andrade: caixetaandrade@ie.ufu.brJunior Garcia: jrgarcia@ufpr.br