GDP: The Wrong Yardstick

This week’s Time Magazine is a special Stephan Faris issue, at least in Europe. Along with my story on jellyfish, they ran an essay on why GDP is a false measure of progress and a statistic that masks a country’s true economic growth.

Natural disasters, oil spills, car crashes, riots, crime: anything you pay to fix will boost GDP. Helping a neighbor up the stairs, skipping work to watch your son’s Little League game, strolling in the woods won’t. GDP tallies the value of an item, but not the environmental cost of its production: pollution, carbon emissions or the depletion of minerals and ecosystems. “It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets,” said Robert Kennedy in 1968. “It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials.”

GDP doesn’t even consistently measure what actually gets done. Did you pay a cleaning company to clean your floors? Congratulations, you’ve added to this year’s numbers. Did you scrub them yourself? Sorry, you haven’t. Buying eggs from a factory farm: a GDP boost. Raising chickens in your backyard: nope. Forty years ago, buying a VCR to watch a movie at home would have been a significant contribution. Today, picking up a DVD player adds almost nothing. But doesn’t the more modern machine provide the better picture?

Today, spurred in part by the economic crisis, experts are meeting in Korea to try to devise a better set of measurements.

[Angel Gurria, secretary-general of the OECD] told experts on the environment, development, business and social issues that without such new indicators, a “crisis of confidence” could erode trust in institutions and in democracy itself.
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Gurria said political momentum is now building for a new generation of statistics to focus on social well-being and progress as well as sustainability issues and various forms of inequality.

“Economic resources are not the only thing that matters in people’s life.”