Contesting the usefulness of GDP, however, is nothing new. US presidential candidate Robert F Kennedy questioned the Gross National Product (GNP) – GDP plus factor incomes earned by foreign residents, minus income earned in the domestic economy by non-residents – during the first campaign speech in 1968. ‘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,’ he had said.
As the US’s real median income in 2020 has increased by roughly 127% since 1984, while the real GDP per person has increased by about 172%, questions about ‘whose GDP has risen’ may well also arise from Americans.
We know that the contribution of a few wealthy people to GDP is significant. It’s like the batting average in cricket – few high scores influence it. But it does not accurately portray consistency, performances under pressure, home versus away performances, and performances while batting first or chasing. I’m speaking metaphorically, of course.
A wider collection of metrics would better reflect the batter’s potential. Similarly, GDP shows something specific and crucial. It ignores social inequity, the contributions of unpaid work, the dwindling of natural resources or biodiversity, and how technology is changing society. GDP doesn’t indicate if a recovery in the economy is equitable. For instance, it fails to depict the growing divide induced by the Covid-19 pandemic.
In their 2019 book, Good Economics for Hard Times, Nobel laureates Abhijit Banerjee and Esther Duflo suggested it could be ‘time to abandon our profession’s obsession with growth’. Although Bobby Kennedy’s criticism has been referenced frequently, the GDP measure has survived, mostly unaltered, possibly because it is deceptively simple and consists of a single- headline figure directly comparable from year to year and across nations.Former French president Nicholas Sarkozy sought to create a ‘suitable’ alternative for GDP. He called a high-profile 20-person committee, led by Joseph Stiglitz, Amartya Sen, and Jean-Paul Fitoussi. The 292-page 2009 report recommends that ‘quality-of-life indicators in all the dimensions covered should assess inequalities in a comprehensive way.’After becoming PM in 2010, David Cameron wanted to implement it in Britain to measure progress, ‘not just by how our economy is growing, but by how our lives are improving – not just by our standard of living, but by our quality of life’. In 2021, the UN secretary-general Antonio Guterres also said in ‘Our Common Agenda’ report: ‘We must urgently find measures of progress that complement GDP, as we were tasked to do by 2030.’
The UN’s Human Development Index (HDI), which considers life expectancy, the average years of schooling, and gross national income per capita, is just one of many alternatives. The Genuine Progress Indicator (GPI), used in some US states like Maryland and Vermont and in Atlantic Canada, considers the effects of crime, poverty, ozone depletion, commuting time, and benefits like higher education on a country’s economic health. The rise of GPI in the US between 1950 and 2004 was found to be slower than that of real GDP. Then, with statistics like Bhutan’s Gross National Happiness index, even one has room to romanticise.
New Zealand’s Living Standards Framework aims to capture the multi-dimensional nature of social progress by compiling a dashboard of indicators, each of which attempts to track some aspect of what matters to society. A 2021 Harvard Business Review article (bit.ly/47mFIrs) also suggested transforming GDP into a series of indicators: GDP itself, indices for equitable income distribution, exacerbating environmental challenges and overall day-to-day well-being. However, too many indicators would be a poor substitute for a single headline figure like GDP in direct comparability.
Let’s see whether a set of sensible and widely acceptable measures can replace GDP – and batting average – soon.
The writer is professor of statistics, Indian Statistical Institute, Kolkata
