By Kira Bradley, GLOBUS Correspondent.
Gross domestic product (GDP) is the measure used to determine economic progress and growth. Governments use GDP to monitor their rates of consumption, investment and government spending. This proxy is important for many economists and government officials, as it is said to measure the size and health of an economy, and can be used to influence financial decisions.
GDP is calculated as either the product of everyone’s yearly earnings, known as the income approach, or as a product of everyone’s yearly spendings, called the expenditure method. If a country has a positive GDP value, this can be said to mean unemployment rates in a country are low and wages have increased. Thus, high GDP is associated with economic prosperity, and determines how well a country is seen to be doing.
However, it is argued that this conception is too narrow. Whilst GDP is an effective method of calculation for the goods and services produced in a country, it is an ineffective measure of welfare. It is suggested that GDP needs to be replaced, with a more inclusive measure that incorporates the environment, and the living standards and wellbeing of citizens. This would enable countries to consider questions which are currently overlooked, such as is growth fair, is it green and is it improving our lives?
Moreover, GDP can exclude groups of people when measuring a countries progress. Women are an example of such, when we consider their unpaid domestic work. It is women who conduct the majority of household work compared to their male counterparts. Yet, this labour is not included in GDP. It is argued that if women’s unpaid work was included in GDP calculations, then OECD countries’ GDP would be set to rise by 20% to 50%. Thus, an alternative to GDP would need to measure work that takes place in the private sphere, and not just that of the marketplace, to ensure all groups are included.
Our modern economy therefore needs something better than GDP, a new scope which goes beyond growth, and moves towards societies goals in sustainable and beneficial ways. This would involve rethinking things such as employment statistics and what counts as ‘good jobs’. Such statistics fail to tell of those who cannot afford a decent standard of living or of those whose work is precarious, causing them to worry about whether they will be in work the following month. Furthermore, GDP has been criticised for not measuring things such as health, crime, suicide rates, family breakdown and income gaps, to mention a few
There are a number of alternatives to GDP that have been put forward. The Genuine Progress Indicator (GPI) was suggested in 1994, moving towards assessing economic growth in terms of people’s quality of life. GPI places emphasis on the value of the natural environment and communities, including recognition of things such as unpaid work, volunteering, resource depletion, cost of under-employment and reliance on foreign assets.
Furthermore, the wellbeing economy advocate and political scientist, Katherine Trebeck, envisions an economy that will move away from measuring growth in terms of GDP. She suggests this proxy is unsustainable, as it implies that buying more stuff equates to greater prosperity. It does not incorporate how this accumulation is damaging our planet, our health, our society and our wellbeing. Therefore, she instead puts forward the measure of the the number of girls who ride bikes to school. By adopting this, a country would be able to calculate measures such as; street safety, green transportation, and female education.
To ensure development is sustainable in our future, we need a reconsideration of GDP and its effectiveness as a proxy of growth. The measure should be altered or replaced, to place people’s satisfaction and happiness over wealth and accumulation, to instead frame this as the goal of a healthier and flourishing society.