Gross Domestic Product (GDP) is not a good way to measure progress

Contributed by Glen Davis

Gross Domestic Product, (GDP), like ‘the market’ is something that’s portrayed as having always been around, as a natural way of measuring progress.


The concept of a GDP is a measurement of the value of finished goods and services within a country over a specific time frame. Then you can divide the GDP by the population of the nation, to determine the GDP per capita.

The term as we know it/use it, goes back to 1934 when the Nobel Prize winning economist Simon Kuznets presented a report to United States parliamentarians, though its origins go back to seventeenth century.

Kuznets himself was realistic enough to acknowledge you can’t measure how well a nations’ population are faring, by simply determine from measuring the national income.

The great historian Eric Hobsbawm had his criticisms of looking at society’ s development from a purely economic perspective, saying quite a bit about the topic.

This quote may be apt:

“It needs a return to the conviction that economic growth and the affluence it brings is a means and not an end. The end is what it does to the lives, life-chances and hopes of people.”

Eric Hobsbawm

So, is GDP a relevant way to measure progress/gains, in our world?

With increasing inequality, as well as symptoms such as increased reporting of mental health illnesses from the stress of modern life in the advanced capitalist countries, how does GDP help us understand the issues people face?

When you have bastions of capitalism such as the World Economic Forum, as well as the Economist magazine, disputing the validity of GDP as a measure, you really do wonder if it’s a valid measure.

Importantly, there are changes to this paradigm.

Some nations, like Aotearoa (New Zealand), measure progress/gains using wellness. Instead of reducing progress to an economic formula, they use a Happiness Index.

One area they seek to tackle is childhood poverty. Is their approach of use, or is it just a ‘feel good’ cop out?

Acknowledging a wellness measure does not critique capitalism, but it is a way of changing the paradigm. Can that help create a better way of measuring how we’re progressing?

If we accept the whole GDP concept is flawed, we could then replace it with a new way to measure human progress such as literacy, life expectancy and the

Human Development Index. Maybe the wellness approach Is the way forward. Are there other options?

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