June 12, 2020

By John McNally

This post is part of Smart Prosperity Institute’s Smart Stimulus Project and supports the work of the Task Force for a Resilient Recovery. Want to receive our latest analysis and insights? Sign up for our monthly updates here.

 

As we begin the long climb out of the COVID-battered economy, experts are deep in discussion about how to build a resilient recovery. Smart Prosperity Institute recently submitted a framework to help policymakers identify government measures that fit the bill.

But beyond the scope of outlining principles, little has been offered to help policymakers understand what that means in practice. What goals or metrics are useful to measure the ‘resilience’ or ‘sustainability’ of a recovery? These are complex questions that need answers.

Luckily, Canada already has many of the tools and indicators it needs to find them. The country currently tracks progress towards achieving its 2030 sustainable development agenda through a detailed suite of indicators outlined in the Canadian Indicator Framework, which encompasses both the Sustainable Development Goals and the Federal Sustainable Development Strategy. These include many of the objectives and metrics to advance every criteria policymakers desire for a resilient recovery.

What Canada now needs is to apply these existing indicators to assessments of policies in the recovery. Benchmarking resilience, sustainability and equity is more, not less, important in a crisis. Canada should integrate relevant indicators from this set into measurements of the overall success of its recovery to ensure it actually advances the principles it champions. 

 

We can’t manage what we don’t measure

If Canada wants to turn these trendy terms into actionable criteria, governments will need to know what to look for when assessing a given measure. That means outlining the specific goals a policy seeks to achieve, and the indicators that will be used to measure progress towards them. To do that, they will need to add metrics to the performance assessments we already use.

The majority of data used to track the effectiveness of stimulus falls into two categories: aggregate national measures, or project specific numbers. Aggregate national measures include GDP growth and reductions in unemployment across Canada. Project-specific measures include job creation figures and the timeline for realizing economic benefits. As economic measures to outline trends, these work well. However, aggregate indicators only capture what they measure. An aggregate measure doesn’t capture regional trends or outline the reasons why growth recovered, which will be incredibly important in this crisis given the range of impacts felt in different regions.

Aggregate measures also ignore the reality that we prefer some kinds of growth over others. An economy that recovers primarily based on increased employment in part-time or precarious positions is far more susceptible to future shocks compared to one who recovery is driven by the growth of full-time jobs that offer benefits, or investments in the industries of the future. The latter scenario offers the stability needed to increase consumer spending over time, and supports investments that improve productivity over the long-run.

Finally, these aggregate measures do not include the indirect costs associated with some activities. If growth comes at the expense of furthering inequality or polluting landscapes, those have costs we all end up eventually paying. Countries with higher inequality experience slower growth. Polluted water and air raises costs for our health care systems, and lowers our average quality of life.

All of these factors mean that supporting a resilient, sustainable or equitable recovery will require more than measuring aggregate performance. Project-specific measures do hold more promise, yet policymakers still need to use standardized indicators to compare project performance. If policymakers want to achieve these goals, there are four recommendations they should take to integrate metrics that track thee into stimulus assessments.

 

Recommendations

1) Identify which indicators support each objective. In the COVID crisis, different parties have borne the brunt of the economic impacts. Women make up 52% of the unemployed labour force, over 30% higher than in 2008-2009. Youth unemployment is over 27%. Any recovery will need to ensure that these unemployed workers are productively brought into the labour force by targeting vulnerable populations and addressing the barriers to workforce participation. Advancing competitiveness in low-carbon sectors, and supporting Canada’s climate targets, is also critical.

Each of these objectives aligns with an established Sustainable Development Goal and has an accompanying set of indicators Canadian policymakers can use to track progress towards achieving it. Canada’s Indicator Framework, developed as part of the upcoming 2030 Agenda National Strategy, outlines targets aligned with the SDGs across the short, medium and long-term. A more detailed set of environmental targets is outlined in the Federal Sustainable Development Strategy, which is also aligned with specific SDGs.

Cumulatively, there are hundreds of indicators. Policymakers cannot hope to apply every single indicator to every single project. However, identifying a select set of indicators from the list would offer a useful starting point to being tracking progress and evaluating performance.

 

2) Apply the selected indicators to assess all projects. Every proposed investment measure should be scored based on how well it advances the desired principles in Canada based on the indicator set selected to measure it. This is especially important for policies that aren’t explicitly ‘social’ or ‘green’, like fiscal support policies in natural resource or service sectors. No policy is implemented in a vacuum, and each one will have an impact on people, the environment and the economy. Assessing only some measures against the SDGs ignores that fact. Transparently and universally applying assessments to understand how all policies support the SDGs will be critical in selecting the ones that offer the types of benefits policymakers seek to define this recovery.

 

3) Build suites of policies that score well on these measures. As previously noted, a tax policy like an accelerated cost of capital allowance is not going to support sustainable development across a large range of indicators. However, a given measure can be paired with others to ensure the overall suite of policies advance these objectives.

This will likely offer an additional useful lens to policymakers in helping them identify which of their priorities are inadvertently left out when using this technique. This can help show where indicators would be useful to inform future policy. One example is climate resilience and adaptation, a critically important area that is currently insufficiently covered within the broader Indicator framework. Supporting a suite of measures that prioritized adaptation might therefore be helped through the development of new indicators.

 

4) Track progress and adapting to trends and data. Supporting resilience will likely require that changes be made to policies once they are in place if they are not having the desired effects. Policymakers should anticipate this by capturing performance data on these metrics as they come in. They should then be willing to adapt accordingly to continue supporting these objectives.

 

In order for resilience, sustainability and equity to become more than well-intentioned but vague adjectives, Canada needs to measure, track and optimize for them. Otherwise, how do we know if we’ve been successful or not? Putting principles into practice is complex, but should be a priority. The benefits are too large – and risks too high – for our shared values to become a branding exercise.

John McNally

Research Associate