By Klaus Schwab – As finance ministers gather in Washington, DC, for the World Bank and International Monetary Fund’s annual meetings, they will face no shortage of urgent matters to discuss. Fears of a global recession, the US-China trade war, the fallout of the Brexit talks, and a dangerous debt overhang make this the most stressful economic juncture in a decade. These issues must be discussed, and we should all hope that they can be resolved with minimal damage.
All of this assumes an end to the economic short-termism that underpins policymaking today. For that, we should develop scorecards to track our performance on these long-term priorities. To that end, I have three suggestions.
First, we need to rethink GDP as our “key performance indicator” in economic policymaking.
Second, we should embrace independent tracking tools for assessing progress under the Paris agreement and the SDGs (United Nations Sustainable Development Goals).
Third, we must implement “stakeholder capitalism” by introducing an environmental, social, and governance (ESG) scorecard for businesses.
On the first point, we desperately need to change our overall economic frame of reference. For 75 years, the world marched to the beat of the drum called “Gross Domestic Product.” Now, we need a new instrument. GDP gained traction when economies were primarily seen as vehicles for mobilizing wartime production. Yet today’s economies are expected to serve an entirely different purpose: maximizing wellbeing and sustainability.
It is time to consider a new approach. A group of economists from the private sector, academia, and international institutions, including Diane Coyle and Mariana Mazzucato, has already been working on alternate measures and ways to correct for the failings of GDP.
Their Wealth Project, which evolved from efforts initiated by the World Bank, has offered a number of proposals for how we can move forward. more>