As mentioned in a prior page, Gross Domestic Product (GDP) is the global standard for measuring a nation’s economic activity and standing in the world. Technically, GDP is defined as the value of everything a country produces, so it is essentially, the price paid to buy what a country produces. As prices rise, so does GDP. Greater production and worker productivity increase GDP. The focus of all economies is to strive for greater and greater GDP.
Image by Catherine Song © The Balance 2019
The overriding belief within mainstream economics is that a rising GDP means a “healthy” and “strong” economy. Growth in GDP is considered an indicator of rising incomes, increased production of goods and services, and more people being employed. Countries are “ranked” by the size of their GDP; a bigger economy means a wealthier, more successful country.
Through the work of the United Nations, we can see what most of the world’s governments desire. Their focus on “sustainable growth” tries to thread the needle between decent, living wages for the poor across the Global South and trying to preserve what remains of the natural world. The nations of the world are focused on GDP growth, development of cities, and building more material wealth, theoretically to bring the bulk of their populations out of poverty; a poverty, ironically caused by capitalist land grabs, political corruption, and production based on resource extraction.
But of course, GDP does not tell the complete story. There is more to economic activity than growth and gain. There is also loss; loss of biological diversity, species extinction, and a plethora of social costs such as poverty, unemployment, sickness, and death.
The Problem with GDP
Is total spending really a measure of a nation’s well-being? Not everyone believes that it is. Every plane crash, nuclear accident, and disaster is a boon for GDP. Even GDP’s developer, Simon Kuznets, acknowledged that it merely measures economic output and does not attempt to measure a peoples’ well-being, even though we are often led to believe it does.
In 1968, Robert F. Kennedy put it this way:
“Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product … if we should judge America by that – counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children.
“Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. 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. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.”