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Sarkozy and Stiglitz: A New Way to Grow

While Barack Obama was busy yesterday telling Wall Street to shape up, French President Nicolas Sarkozy spent this morning criticizing the entire economic status quo. The key issue in question: how the world tabulates economic growth, or GDP. We’ve always known that the metric was flawed; since GDP is simply a measure of all economic growth, things like natural disasters, traffic jams, and urban violence (all of which put people and money to work even as they wreak havoc) can actually raise a country’s overall GDP. But never has anyone seriously tried to come up with a better way to calculate growth. Until now: at the behest of Sarkozy, a team of superstar economists, headed by Nobel laureate Joseph Stiglitz, have just unveiled some new ways to tabulate a country’s economic health. See below the dispatch from NEWSWEEK’s Tracy McNicoll, who attended the unveiling of the Stiglitz Report in Paris this morning:

In the magnificent Grand Amphitheatre of the Sorbonne in Paris's ancient student quarter this morning, Sarkozy spoke to a group of modern economic luminaries and other guests, with backlit marble statues of great scientific philosophers like Descartes and Pascal peering down at him from their perches. He waxed lyrical about the band of experts he'd commissioned 19 months ago to redefine how economic well-being is measured. The result was a 300-page report that blends science and philosophy. Even its authors admit it is meant only to open the debate, not conclude it.

Sarkozy had initially called on the group in February 2008 to tackle the gap between people's perceptions of their own day-to-day economic well-being and what politicians and statisticians were telling them about the economy. The disconnection between the two has increasingly led to a lack of trust in government and politicians around the world. As Sarkozy put it today, “Nothing is more destructive for democracy.”

When the project began, virtually no one─with the notable exception, perhaps, of Stiglitz himself─would have guessed that there was a violent recession looming. But the crisis made the commission's work all the more relevant, as the world searches for a more sustainable way to grow in the future. “In an increasingly performance-oriented society, metrics matter. What we measure affects what we do,” Stiglitz said today. “If we have the wrong metrics, we will strive for the wrong things. In the quest to increase GDP, we may end up with a society in which citizens are worse off.”

The report recommends shifting economic emphasis from simply the production of goods to a broader measure of overall well-being, which would include the benefits of things like health, education, and security. It calls for greater focus on the effects on income inequality, as well as new ways to measure the economic impact of sustainability (climate change specialists like Nicolas Stern are members), and recommended ways to include the value of wealth to be passed on to the next generation into today's economic conversation. What it didn’t do is come up with a quick and easy new way to tabulate a new measure of wellbeing. Some of the necessary yardsticks already exist; others still need to be invented.

Still, Sarkozy said he plans to shop the report all over the world. “France will open the debate on this report's conclusions everywhere. It will put it on the agenda of every international conference, every meeting, every discussion where building a new economic, social, and ecological order is the objective,” he told the Sorbonne crowd. “France will fight for every international organization to modify their statistical systems by following the commission's recommendations. It will propose to its European partners that Europe set the example by putting them into action. [France] will adapt its own statistical machinery in consequence,” he promised. Even the commission's rapporteur admitted he wasn't expecting Sarkozy's strong reaction.  

Stiglitz himself has been championing the cause for some time. He recalled this morning how, as head of President Bill Clinton's Council of Economic Advisers, he had put forward some of the same ideas. But, says Stiglitz, “We met such political resistance that our initiatives were thwarted.” In Sarkozy, Stiglitz has found a better advocate─perhaps in no small part because France’s own economic health would look a lot better using the alternative metrics.