The debate over the need to broaden the scope of economic indicators – and more particularly, moving beyond measurements of GDP – has inspired a wide range of studies on the topic both in Italy and abroad. This roundtable event examined a recent Aspen Institute Italia-Fondazione Edison study entitled “Italy in the new geo-economy of the G-20”, which aims to contribute further to this discussion. The study reveals an Italy that is better-placed than indicated by traditional rankings and compares favorably with other industrialized economies in numerous fields. In particular, in terms of size indicators, whilst Italy suffers from a high level of public debt, it ranks as the country with the lowest rate of household debt. It boasts the second-highest placing in both The Economist’s Quality of Life Index and the ranking for household median net worth per adult (at purchasing power parity). Even its performance on productivity indicators is positive on the whole, with Italy coming in at third place after France and the United States, whilst in the area of exports, two thirds of Italian products are sector leaders in international markets. It was acknowledged, however, that there are areas characterized by significant lags and rankings that are far from encouraging, such as Italy’s tenth placing in terms of expenditure on research and development and its bottom position in the league table for energy self-sufficiency. Also ranked low are the efficiency of the country’s bureaucracy, particularly in the field of the administration of justice, and the quality of its infrastructure. Hence, Italy still suffers from significant shortcomings in certain key sectors.
It was stressed that the study does not set out to demonstrate the insignificance of Gross Domestic Product as an indicator, much less to replace it with other statistics. Nevertheless, it is now well-established that economic analyses based solely on GDP figures are misleading, with an economic diagnosis made exclusively on this basis viewed as the equivalent of a blood test that only examines cholesterol levels.
One need only consider the years preceding the crisis, where GDP figures failed to distinguish healthy growth from artificial growth that was fueled by the subprime bubble responsible for the current crash; or even the present period, in which the countries that are experiencing the greatest social hardship – such as the United States and the United Kingdom – are also those that, according to GDP indications, will come out of the crisis with greater ease.
The rating of Italy’s performance on the basis of indicators that go “beyond GDP” thus provides further food for thought regarding the next steps that should be taken towards using alternative indicators, and the need to formulate new public policies aimed at building on Italy’s strengths and addressing its weaknesses. It was noted that GDP measures the flow of wealth, whilst a comprehensive economic analysis should also take into account stock, that is, the state of a country’s “balance sheet”. In addition, GDP is a unidirectional indicator and does not gauge possible unequal distributions of wealth, or economic or other variables that elude its grasp, such as improvements in the quality of public services or the intangible value of an investment (for instance, in the cultural sphere).
Notwithstanding these considerations, the usefulness of new metrics will depend on the ability to draw consistent and intertemporal comparisons. For this to happen, there needs to be broad consensus over their use, the achievement of which is not at all a foregone conclusion. It is entirely possible that, given their complexity, some indicators may only be used in industrialized countries. It will also be imperative for governments to incorporate means of checking new indicators in ex-post evaluations of economic policies. By way of conclusion, it was observed that new indicators will also need to contribute to the formulation of a new development model that takes into account causal relationships, as any new set of indicators would only be meaningful if viewed in dynamic terms.