10 Trends for 2021
10 Measure to measure
Using GDP as the yardstick of economic growth is so universally accepted that it seems strange to think that the whole concept was invented less than a century ago. Its roots in common use lie in America’s struggle to emerge from the Great Depression of the 1930s. At the time, the idea that adding up the total value of economic activity would be a good metric of success, and should be used to guide government policy, was justified. The relationship between economic growth and standards of living was close enough, across enough of society, for the two to appear integrally linked. So ingrained has this link become in our minds that to even think of questioning it seems ridiculous. Yet that is what Joseph Stiglitz – and countless other economists and leading thinkers – are now doing. The main problem with GDP is that it focuses on the amount of growth being achieved rather than the quality of that growth and takes no account of the human or environmental cost of achieving it. When viewed in these terms, “growth for growth’s sake – at any cost” is not sustainable. As Simon Kuznets says of the statistic, he himself created: “distinctions must be kept in mind between quantity and quality of growth, between its costs and return, and between the short and the long term. Goals for more growth should specify more growth of what and for what.” Economic growth, driven by globalization and technology, has brought huge benefits for many parts of the world over the last 30 years. But in many countries, it has also driven sharp increases in inequality, which have been heightened by a pandemic that is disproportionately affecting more vulnerable sections of society. Low wage workers and minorities have suffered most from a health and a financial perspective – which has economic as well as social implications that central banks are paying attention to. Particularly worrying is that there is increasing evidence of a ’K-shaped’ recovery – where some aspects of the economy and society are recovering far faster than others. Skilled, higher-income workers in knowledge-based industries have fared much better during the crisis; and as things stand, will continue to do so. Such concerns resonate at a time when governments around the world are investing trillions of dollars in supporting their economies – for the second time in barely more than a decade. Ensuring a return to economic expansion is an entirely legitimate goal, but many are demanding that we should “build back better” with Universal Basic Income becoming a topic of mainstream political and economic discussion. With so many companies now embracing the concept of the triple bottom line – people, planet, profit – through their environmental, social and corporate governance (ESG) policies, there is an emerging alignment between the ambitions of governments and leading businesses over the need to change the way in which we think about success. So, does it matter what statistics we use – and if we are not focused on GDP, what should we be using? Peter Drucker argued that “if you can’t measure it, you can’t improve it” – which certainly supports the argument that we should develop metrics that more fully reflect our progress in tackling societal and environmental issues as well as economic ones. The World Economic Forum’s Inclusive Development Index (IDI) is one of the most high-profile alternative measures. GDP and employment growth feature prominently – alongside measures of inclusivity, equality and sustainability. Scandinavian countries score highly, as they do in research which explicitly ranks countries and cities by ‘happiness’ – which may be no coincidence given the success Sweden has had in tackling income inequality during previous crises. Perhaps the time really has arrived to change the fundamental yardstick by which so many governments are judged – which would have major implications for real estate. If we were re-trained to evaluate government success with a broader measure of progress such as the IDI, national policies would be targeted and implemented rather differently. Not ignoring economic growth – but investing directly, and incentivising others to invest, in areas that benefit society in addition to stimulating the economy. Just as Larry Fink forecasts a “significant reallocation of capital” in response to climate change, a widespread shift in policy along these lines would have a similar impact – by design. High among the beneficiaries would be many of our urban areas most in need of regeneration, along with the most vulnerable people in society that typically make up their residents.
Changing how we measure success will not, on its own, make the difference. But it would be a good start. After all, as Joseph Stiglitz concludes, “If we measure the wrong thing, we will do the wrong thing”.
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Israeli commercial real estate deals
YITZHAK TSHUVA & YAKIR GABAY complete sale of US co Star (Globes).
FATTAL sells, leases back two Munich hotels (Globes).
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Sustainability in real estate – How technologies are integrated into the real estate industry to lead sustainability (LinkedIn).
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For sale 2,200M2 commercial building in Petah Tikva, in the center of Israel.
For sale two floors (2,300M2) out of five, in a comercial building in the center of Tel Aviv.
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