Fun fact: When I was born there were 3 billion people in the world. We are now well over 7 billion. When I die, we will be around 9 or 10 billion. The theoretical maximum is around 10 billion.

One lifetime and the planet has gone from one third full to full. And as we get closer to a full planet it is undeniable our economic, social and ecological systems are stretched and often breaking down. Yet we still embrace the same fundamental underlying adherence to economic growth as defined by economist Simon Kuznets in 1932 – the Gross National Income.

Kuznets received a Nobel Prize for this work in 1971. Now here’s an interesting fact that we seem to have forgotten –  in the very document Kuznets presented to the US Senate in which Gross National Income is defined, he warned the US Senate of three clear limitations to this approach:

1. The need to equitably distribute the income
2. The fact that total productivity is not fully recognised, (he cites ‘housewives’ services’ as an example)
3. And the focus on GROSS (rather than NET) national product does not fully account for a whole range of costs (like ‘traffic jams’, he correctly anticipated)

Kuznets famously said: “Economic welfare cannot be adequately measured unless the personal distribution of income is known. And no income measurement undertakes to estimate the reverse side of income, that is, the intensity and unpleasantness of effort going into the earning of the income. The welfare of a nation can therefore scarcely be inferred from the measurement of national income as defined herein.”

So here we are, 87 years later doing exactly what he warned us not to. Australia is emerging from 28 years of sustained economic growth. Our wealth has grown by over 250% in the last 15 years.

Yet this overarching growth is paralleled by a downturn in individual financial stability and social wellbeing. This has been made worse by a season of intense bushfires and now the COVID-19 pandemic. Like the proverbial frog in the boiling water the social cost is inexorably rising:

• We’ve had 30 years of wage stagnation
• Some 3 million people or 13.3% of the population live in relative poverty
• Household debt has hit unprecedented levels at nearly 200% of disposable income
• Housing is increasingly unaffordable, and we have one of the highest price-to-income ratios in the world – the possibility of a ‘disorderly correction’ may wreak further havoc
• Not to mention the externalisation of the costs of climate change and environmental degradation, the health impacts of our food supply, our adherence to consumption.

I could go on. The polarisation of ideologies has done little to build rationality into public policy. Irrespective of where your views might sit on the ‘left/right’ dimension, an ideologically-driven approach to policy has not done anyone any favours, with the possible exception of the Top 1% of Australia’s wealthy whose share of Australia’s income has grown from 5% to 10% in the last decade or so. More than ever we need evidence that balances the conversation.

It has always been recognised that large numbers of people in any population without access to the basic needs of life will be detrimental to the quality of life as a whole. That’s why we have some form of ‘social safety net’ – to ensure that those who find themselves excluded, for whatever reason, are able access the basics of life.

However, in recent decades, the social safety net has increasingly been regarded as a ‘welfare burden’. As a result, Governments have increasingly sought to find ways to reduce the cost of this ‘burden’, with a) insufficient regard to the human cost and b) the resultant shift of this ‘burden’ being picked up by the NFP sector.

This is where great social impact measurement comes in! This vital work helps give sufficient regard to the human cost. Great social impact measurement should help positively transform communities. It should help, as Kuznets pointed out, infer the true welfare of a nation.

This is one of the wonderful opportunities presented as we start to look to a post-COVID world. Great social impact measurement can go a long way to guide the global economic rebuild to ensure that human costs are given sufficient regard. To ensure that sense of community is valued alongside purchasing power. And to ensure that equity is understood in a social sense as well as a financial sense.  And to ensure we have an economic system relevant to a planet where boundless economic growth at the expense of equitable society is seen as the nonsense it truly is.

Ross Wyatt

SIMNA Board Member & Managing Director at Think Impact