Why GDP Isn’t Enough: Rethinking How We Measure Success
Every year, India enters the “Pariksha Pe Charcha” season—a reminder to parents not to treat board exams like a national crisis. High marks often hide underlying issues like stress, health problems, and mental pressure. The race for grades ignores the personal sacrifices that never show up on a report card.
GDP works exactly the same way. We chase a single “shiny” number and ignore the social, political, and environmental mess behind it, yet we still call it a success.
The History of GDP
Gross Domestic Product (GDP) was a product of wartime necessity. The U.S. government tasked economist Simon Kuznets with measuring the country’s actual economic output. The goal was practical: to see how much was being produced, what was lost to war, and where resources should be sent.
However, within a few years, Kuznets became concerned with how his metric was being used. He warned that GDP was never meant to measure whether people were actually better off. Despite his warning, politicians and policymakers grew fond of it because it was simple, quantifiable, and easy to compare across nations.
The biggest flaw is that GDP alone doesn’t show how wealth is created. For example, a country could increase beer production while ignoring the resulting health problems, and its GDP would still go up.
The Environmental Cost of Economic Growth
Current economic thinking often devalues nature. A standing forest is often seen as an “underused resource.” It only gains monetary value in the eyes of GDP when it is cut down for timber. The logic is simple: building factories and creating jobs raises economic output.
However, this comes at a high price. According to the World Bank, between 1995 and 2018:
- Low- and middle-income countries saw an 8% drop per person in forest wealth.
- Global marine fish stocks collapsed by 83% due to overfishing and poor management.
Moving “Beyond GDP”
International institutions are finally searching for better ways to measure welfare. In January, the UN held a conference titled “Beyond GDP.” UN Secretary-General António Guterres has formed a group to create a new “dashboard” for success that prioritizes human well-being, sustainability, and fairness.
Several alternatives have been suggested over the years:
- Human Development Index (HDI): This measures education, health, and living standards. While popular, it isn’t updated quarterly and doesn’t track economic recessions.
- Genuine Progress Indicator (GPI): This starts with consumer spending but adds non-market benefits and subtracts environmental costs. It is highly accurate but very difficult to calculate.
- Doughnut Economics: This framework focuses on meeting social needs without crossing ecological limits. It is intuitive but has not yet gained mainstream political support.
- The “Degrowth” Argument: Some economists believe we should stop chasing growth entirely because it depletes resources. This is easier for wealthy nations to consider than for developing countries.
Currently, most policymakers are hesitant to adopt these changes. Financial markets thrive on growth, and moving away from GDP remains a difficult political sell.
Success Stories: Doing Things Differently
Despite the challenges, some places are leading the way:
- Bhutan: Has used “Gross National Happiness” as its official policy since 2008.
- New Zealand: Since 2019, it has built well-being goals directly into its national budget.
- Amsterdam: The city uses “Doughnut Economics” to guide its environmental policies.
Can We Grow Without Damage?
A practical question remains: can economies grow without hurting the planet? Romania provides a hopeful example. Between 1990 and 2023, the country grew its economy while its greenhouse gas emissions fell by roughly 75%. This happened because they shifted toward service-based industries and invested heavily in renewable energy like solar.
This “decoupling” of growth from pollution requires better technology—producing the same goods with less harm. While tools like electric vehicles and clean energy aren’t perfect, they are a step in the right night direction.
The Path Forward
The most realistic way forward involves three steps:
- Better Measurement: Using tools that show the real cost of growth.
- Innovation: Investing in technology that protects the environment.
- Behavioral Change: Encouraging gradual shifts in how we consume.
It is a slow and messy process. But until we change how we measure success and improve our technology, the debate over GDP will remain stuck exactly where it is today.
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