Policy Choices for a Genuine Vermont Economy Jon D. Erickson, Zach Zimmerman, Eric Zencey Gund Institute for Ecological Economics University of Vermont www.uvm.edu/giee
Vermont Act 113 An act relating to the genuine progress indicator (a) Purpose. The purpose of the genuine progress indicator ( GPI ) is to measure the state of Vermont s economic, environmental, and societal well-being as a supplement to the measurement derived from the gross state product and other existing statistical measurements. (b) Definition. The GPI is an estimate of the net contributions of economic activity to the well-being and long-term prosperity of our state s citizens, calculated through adjustments to gross state product that account for positive and negative economic, environmental, and social attributes of economic development. (c) Intent. It is the intent of the general assembly that once established and tested, the GPI will assist state government in decision-making by providing an additional basis for budgetary decisions, including outcomes-based budgeting; by measuring progress in the application of policy and programs; and by serving as a tool to identify public policy priorities, including other measures such as human rights.
MISSION Improve the economic well-being and quality of life of Vermonters while maintaining our natural resources and community values. OVERARCHING GOAL not only grow jobs and wages and increase our Gross Domestic Product, but also to improve the Genuine Progress Indicator a measure that takes into account economic, social and natural assets and impacts by 5% over baseline over the next five years.
Genuine Progress Indicator = A monetized indicator of sustainable economic welfare. Attribute Meaning Limitations Monetized Indicator Sustainable Economic welfare Benefits and costs that can be expressed in monetary terms An indication of how we re performing Non-declining for generations to come Limited to our consumption of goods and services Benefits and costs that cannot be expressed in monetary terms Not a comprehensive measure But with a great degree of uncertainty Not happiness or well being in any other domain Source: John Talbreth, Center for Sustainable Economy
GPI = Economic + Environmental + Social Personal Consumption Income Inequality Adj. Personal Consumption Services of Consumer Durables Cost of Consumer Durables Cost of Underemployment Net Capital Investment Cost of Water Pollution Cost of Air Pollution Cost of Noise Pollution Cost of Net Wetland Change Cost of Net Farmland Change Cost of Net Forest Cover Change Cost of Long-term Environmental Damage Cost of Ozone Depletion Cost of Non-Renewable Energy Resource Depletion Value of Household Work Cost of Family Changes Cost of Crime Cost of Personal Pollution Abatement Value of Volunteer Work Cost of Lost Leisure Time Value of Higher Education Services of Highways and Streets Cost of Commuting Cost of Motor Vehicle Crashes
A genuine economy A. Is focused on short term gains, with the goal of using up resources as fast as possible. B. Is focused on long term value, with the goal of sustaining economies and livelihoods.
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Per Capita, 2000$ 35000 30000 Vermont GSP v. GPI per capita Mean annual GSP change = 2.2% 25000-43% 20000 15000 10000 Mean annual GPI change = 0.6% 5000 0
Billions 2013$ Total GSP vs. GPI (Billion 2013$) 35 30 GSP 25 20 15 GPI 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 8
2013 Vermont Estimate Progress Recession Continues GPI peaked in 2007 and in 2013 was at 11-year low However, GSP peaked in 2006, declined for 3 years during Great Recession, but has since more than recovered (7.7% above 2006 high) While GSP grew by 2.3% from 2012 to 2013, the GPI declined by 4.34%. Since 2000, the gap between GSP and GPI was at it s lowest in percentage terms in 2005 (41.8%), about the same as 2007 before the recession. The gap between GSP and GPI was at 52.9% in 2013, the highest gap since 1960 (beginning of estimate) 9
2013$ GSP vs. GPI per capita (2013$) 50000 45000 GSP 40000 35000 30000 25000 20000 GPI 15000 10000 5000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 10
2013 Vermont Estimate In per capita terms, GPI per capita peaked in 2005-2007, and has declined 5 of 6 years since In 2013, GPI per capita at 86.7% of 2005 peak However, GSP per capita peaked in 2006, and fully recovered by 2010; in 2013, 7% above prerecession high 11
A genuine economy A. Creates more costs than benefits over the long run. B. Creates more benefits than costs over the long run.
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Per Capita, 2000$ 35000 30000 Vermont GPI Components 25000 GPI - Economic 20000 15000 GPI - Total 10000 5000 GPI - Social 0-5000 -10000-15000 GPI - Environmental
2013 VT GPI Update Highlights Economic Income Inequality Deduction (17.5% of GSP and ing) Underemployment Deduction (1.9% of GSP and ing) Social Commuting Deduction (9.8% of GSP and ing) Volunteering Addition (1.3% of GSP and ing) Education Addition (10.8% of GSP and ing) Environmental Nonrenewable Energy Deduction (11.6% of GSP & ing) Carbon Pollution Deduction (3.3% of GSP and ing) Forest Land Change Deduction (1.0% of GSP and ing) 14
A genuine economy A. Occurs through depleting non-renewable resources and externalizing costs on distant people in distant lands and distant futures. B. Occurs through substituting renewable for non-renewable resources and internalizing the full cost of economic activity.
Total Energy Consumed per Capita, 2012 (million Btu) WY AK LA ND IA TX NE SD KY IN OK AL MT KS WV MS AR MN SC NM ID TN OH WI MO IL DE WA VA ME PA GA CO UT MI NJ NC OR MD NV NH AZ FL MA VT CT HI CA NY RI Total Energy Consumed Per Capita, 2012 (million Btu) 1000 900 800 700 600 500 400 300 200 100 0 Source: U.S. Energy Information Agency, http://www.eia.gov/state/rankings/ 16
CO2 Emissions Per Capita, 2011 (millions of metric tons) Source: U.S. Environmental Protection Agency, http://www.epa.gov/statelocalclimate/resources/state_energyco2inv.html 17
A genuine economy A. Relies on making products that are unreliable, fall apart, and need to be replaced as fast as they are made. B. Relies on making products that are reliable, durable, and sustain value over the long run.
A genuine economy A. Depends on squeezing every last waking hour out of our workforce, and works people until they are tired, sick, demoralized and need to be replaced often. B. Depends on a healthy balance between work, family, community, and leisure and is committed to the mental and physical health of our workforce and their families.
2013 VT GPI Update Highlights Economic Income Inequality (17.5% of GSP & ing) Largest deduction in estimating VT GPI, and growing From 1990 to 2010, real VT median household income grew by 1.5% while real GDP grew by 56% From 2006 to 2013, only Montana had greater growth in income inequality (relative to itself) VT was 5 th most income equitable nation in 2006; down to 14 th in 2013 5 of 6 New England states in the top 10 of growing inequity Worse in income inequality in nation = New York, Connecticut, Mississippi, Louisiana, Florida 21
2013 VT GPI Update Highlights Economic Underemployment (1.9% of GSP and ing) BLS U6 Rate = total unemployed + all marginally attached workers + total employed part time for economic reason (as a percent of the civilian labor force) + all marginally attached workers. From 2003 to 2013, BLS U6 rate for VT: Lowest in 2006 at 6.4% Peaked in 2010 at 12.5% Down in 2013 to 9.3% Current estimate = 8.4% 9 th lowest in nation; improved from 20 th lowest in nation in 2010 22
Policy choices for a genuine economy will A. Rapidly deplete natural resources; accumulate pollution in our land, water, and air; maximize consumption of any and all things; and erode family, community, and personal health. B. Transition to renewable resources; accommodate pollution within biophysical limits; create widely-shared and broadly defined well-being; and invest in strong families, communities, and healthy people.
Gross Production vs. Genuine Progress for the US, 1950 to 2002 (source: Redefining Progress - http://www.rprogress.org)
GPI per capita, 2000$ 35,000 US vs. Selected State GPI per Capita, 2000$ 30,000 MD 25,000 MA USA 20,000 VT 15,000 10,000 5,000-2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
WY MS AR LA AL WV KY OK SC ND TX IN TN NM NC GA IA MO OH KS MI ID WI AZ NE FL MT UT PA VT IL ME CO DE VA OR CA SD MN NV AK RI NJ MD NY WA HI NH CT MA DC Per Capita GPI by State, 2011, $/person 50,000 40,000 30,000 20,000 10,000 0-10,000-20,000-30,000 SOC ENV ECON -40,000
Current Trend: Income inequality worsens, Gini coefficient increases linearly based on 2006-2013 trend out to.536 in 2030. Equality Trend: Income income inequality improves, Gini coefficient drops from.452 in 2014 to.400 in 2030.
Policy Choices for a Genuine Vermont Economy Jon D. Erickson, Zach Zimmerman, Eric Zencey Gund Institute for Ecological Economics University of Vermont www.uvm.edu/giee
2013 VT GPI Update Highlights Social Commuting Costs (9.8% of GSP, ) After six decades of unrelenting growth, the U.S. experienced its eighth straight year of decline in miles driven in 2011. Vermont peaked at 13,423 miles driven per capita in 2003 Down 15% to 11,399 miles driven per capita in 2011 (10 th highest in nation) Commuting times relatively flat over last 13 years: Mean driving time to work = 21.6 minutes in 2000, up to 22.5 minutes in 2013. However, # of drivers up, # of carpoolers down. 33
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2013 VT GPI Update Highlights Social Volunteering (1.3% of GSP, ) Volunteer rate dropping in VT, from 36.2% in 2010 (6 th in nation) to 33.7% in 2013 (12 th in nation) 19.2 million hours of service in 2013 37.8 volunteer hours per capita 68.4% of residents engage in "informal volunteering" (for example, doing favors for neighbors) 44.1% frequently talk with neighbors 36
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2013 VT GPI Update Highlights Environmental Nonrenewable Energy Deduction (11.6% of GSP ) Carbon Pollution Deduction (3.3% of GSP, ) Forest Land Change Deduction (1.0% of GSP, ) 38
Land Use Change: Forest Cover in New England Foster et al., Wildlands and Woodlands: A Vision for the New England Landscape, 2010. 39
Land Use Change: Forest Cover in New England Foster et al., Wildlands and Woodlands: A Vision for the New England Landscape, 2010. 40
Hallmarks of the Prevailing Economic Model Hallmarks of the New Economy GDP Privatization Specialization Globalization Consumerism Centralization Fiscal austerity Urbanization Technology for nature Market supremacy Competition Throughput Planned obsolescence Financial wealth Depleting capital Public commons Diversification Local self reliance Frugality Subsidiarity Fiscal responsibility Rural revitalization Nature for technology Informal sector Cooperation Resource efficiency Durability Well being Building capital GPI? Source: John Talbreth, Center for Sustainable Economy
GDP = C + I + G + NX Crime Pollution Depletion Work Week Inequality
the welfare of a nation [can] scarcely be inferred from a measure of national income. ~ Simon Kuznets, National Income, 1929-1932 Report to 73rd US Congress, 1934 Distinctions must be kept in mind between quantity and quality of growth, between costs and returns, and between the short and long run. Goals for more growth should specify more growth of what and for what. ~ Simon Kuznets, 1962
Our Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. ~ Robert F. Kennedy, 1968