Historical Background: Indicators

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The United States developed a system of national income accounts during World War II to assess the productive capacity available to support the war effort. Growth in gross national product subsequently became the leading indicator against which policy makers assessed national well-being and progress.

The Genuine Progress Indicator developed and popularized by Redefining Progress, which traces its history back to the Index of Sustainable Economic Welfare developed by Clifford W. Cobb in the 1980s, presented one of the more serious challenges to conventional national income accounting. Both indices modified GDP calculations to present a more accurate picture of economic welfare by accounting for the depletion of social and natural capital, distinguishing between positive and negative expenditures, and recognizing the value of positive non-monetized production.
 
The UNDP Human Development Index, which has gained international recognition, combines financial and non-financial indicators. These are useful steps that open an essential discussion and present a visible, accessible alternative to the limitations of GDP. They are, however, only partial steps that retain many of the distortions which are inevitable when attempting to reduce the well-being of people and nature to a financial metric.
 
In 1985 a group of concerned citizens in Jacksonville, Florida initiated a local indicators project that tracked 75 indicators of community health relating to education, economy, public safety, natural environment, health, social environment, government, politics, culture, recreation, and mobility. Hundreds of communities in Canada, New Zealand and India have since launched similar initiatives.
 
A more recent initiative by the New Economics Foundation in London focuses on the creation of purely non-financial indicators based on people's personal perception of their own well-being.
 
Challenges to the adequacy of GDP as the leading measure of economic performance are moving into the main stream. The alternative indicators movement is particularly advanced in Europe, where the European Union Commission released a major report on The Measurement of Economic Performance and Social Progress in 2009. The Commission on Measurement of Economic Performance and Social Progress created the beginning of 2008 by French President Sarkozy urges a major indicators overhaul. In the United States, The State of the USA is mobilizing a variety of establishment players around a major initiative to develop and popularize non-financial health based performance indicators. These initiatives are an essential step toward a more rational approach to assessing economic performance and engaging a much needed public examination of two essential questions: What is well-being and what purpose should the economy serve?