108. The sorry story of GDP and how a simple tool became the master of our thinking

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GDP was initially developed, in modern terms, maybe by Simon Kuznets, as a simple measurement of how well an economy was doing, and started being taken seriously after the Bretton Woods Accords. It is a huge simplification of an economy’s success. The fact that it is a simplification is its strength. Humans, even those with very little knowledge of economics and social sciences, can engage in one of our favourite activities, pointless competition. How is my country doing against others? Let’s look at GDP. As a result, it has become the driving objective of government. A drop in GDP defines a recession, and a recession is the sure fire way of getting a government fired. But GDP does not measure wellbeing in a society. It tells us nothing about the distribution of the wealth generated. It excludes any activity not performed in exchange for payment, such as voluntary cooperation. It says nothing about environmental impact, public health or citizen happiness. The tail is wagging the dog

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Comments

Sandra K. said…
Indeed, success of the society should be measured by what matters the most to humanity and it’s wellbeing: health, happiness, environment...what of Bhutan?
July 14, 2020 at 1:26 PM
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