David Pilling — 5 ways GDP gets it totally wrong as a measure of our success

GDP's inventor Simon Kuznets was adamant that his measure had nothing to do with wellbeing. But too often we confuse the two. For seven decades, gross domestic product has been the global elite’s go-to number. Fast growth, as measured by GDP, has been considered a mark of success in its own right, rather than as a means to an end, no matter how the fruits of that growth are invested or shared. If something has to be sacrificed to get GDP growth moving, whether it be clean air, public services, or equality of opportunity, then so be it....

GDP is not a measure of “wealth” at all. It is a measure of income. It is a backward-looking “flow” measure that tells you the value of goods and services produced in a given period in the past. It tells you nothing about whether you can produce the same amount again next year. For that, you need a balance sheet - a measure of wealth. Companies have balance sheets as well as income statements. Nations don’t.…

Yes. GDP is an ingenious measure. It tells us something. It should definitely not be scrapped - it is still far too valuable a policy tool for that. And GDP growth can provide the wherewithal for the other things we want in life: health, education, security, opportunity, goods.

But we need to pay more attention to other measures to complete the picture, some of which already exist and some of which we may have to invent. Measures of wealth, equality, leisure, wellbeing and net domestic product, adjusted for negatives like pollution, are places to start.

Good post on GDP versus welfare. Worth reading in full.

World Economic Forum
5 ways GDP gets it totally wrong as a measure of our success
David Pilling | Africa Editor, The Financial Times