Absurdly, we still take for granted that Gross Domestic Product is an accurate measure of success and well-being in a nation, so that if GDP is increasing we think we must be doing better. This is nonsense.
When anybody proudly declares that GDP has gone up by such and such a percentage we should simply chups our teeth and say “So what?”
When the World Bank decrees, as it is inclined to do, that GDP is “the main criterion for classifying economies” and formulates loan strategies aimed simply at boosting GDP we should reject such superficial ignorance. We should take every opportunity to point out the error of that mighty organisation’s outdated and damaging ways.
By the way, did anyone notice how as long ago as 1991 the international development establishment controlled by rich countries quietly changed the mode of measuring economic progress from a Gross National Product to a Gross Domestic Product basis? This was a quiet little change with very large implications. Under the old measurement, the Gross National Product, the earnings of multinational firms were attributed to the country where the firms were owned – and where the profits eventually return. Under the new Gross Domestic Product measurement, however, the profits are attributed to the country where the mine or factory is located. This subtle accounting shift turned many struggling nations into statistical boomtowns while strengthening the push for a so-called “global economy” which is another phase for “multinational paradise.” This covered up conveniently a very basic fact: the rich nations are walking off with the resources of the poor countries and calling it a big boost for the poor. Why didn’t poor countries object strongly to this change in how economies are measured internationally – and why don’t they still?
But let us return to how misconceived and misleading it is to look upon GDP as a suitable measure of national well-being and progress. It is time to stop fooling people by clinging to this indicator, especially since by doing so we simply play into the hands of the “market force” fundamentalists who have inherited the earth. The fact is that GDP and its various proxies – rate of growth, expansion, economic recovery – have become the language in which we report and debate, a barricade of intellectual abstraction which separates us from human reality. We should realise that such phrases tell us almost nothing about what is really going on in our lives.
The GDP is simply a gross measure of market activity, of money changing hands. It makes no distinction between the desirable and the undesirable, evil or good, costs or gain. It looks only at that part of reality the economists choose to acknowledge – the part involved in monetary transactions. The crucial economic functions performed in the household and volunteer sectors go entirely unreckoned. Also, the GDP calculation not only masks the breakdown of social structures such as the family and the destruction of the natural habitat upon which the economy – and life itself – ultimately depend; worse, it actually portrays such breakdown and destruction as economic gain.
Consider this. If you were told that “activity” in your place of residence, Georgetown say, had increased by 20% would you not want to know specifically what activity was being measured? Garbage collection or street-children begging? Childcare or abortions? Charity work or choke and rob? Road repairs or traffic accidents? The mere quantity of activity taken alone says virtually nothing about whether life around you is getting better or worse. In the same way GDP, which is simply a measure of total output, makes no distinction between costs and benefits, between productive and destructive activities, between sustainable and unsustainable endeavours. It is as if a business kept its accounts by merely adding up all transactions without distinguishing between income and expenditure, assets and liabilities. Can we not see the absurdity of this calculation which so rules our public life?
Do we not see that social decline and community breakdown can easily be called growth by another name? For instance, increasing crime, proliferating divorce and mass media addiction replacing stable family relationships have the effect of adding to GDP. In America teenagers spend about four hours a day watching television and playing video games and about five minutes a day alone with their fathers. In Guyana we are headed in that direction too and think that it represents progress because the expansion of mass entertainment certainly adds to GDP while children spending time with their parents does not count.
Also, consider the natural habitat, on the preservation of which our quality of life ultimately depends. The more a nation depletes its natural resources the more its GDP increases. Again, this violates basic accounting principles in that it portrays the depletion of capital as current revenue. If we overfish our waters or overcut our forests this appears in the national books as an economic boom – until the resource disappears. Current national accounting systems around the world treat the earth as if it is a business in liquidation.
GDP also ignores very basic human contributions in the social and communal realms – that is, the economic role of households and communities. This is where much of the nation’s more important work gets done, from caring for children and older people to volunteer work in its many forms. It is the sort of work that holds a nation together. Yet because no money changes hands in this realm, it is invisible to conventional economics. The GDP doesn’t count it at all – which means that the more our families and communities decline and monetised service sectors take their place, the more the GDP goes up and the pundits cheer.
Why do we continue to be brainwashed into measuring human progress in this absurd way? I have said it before and I will say it over and over again – I hope our own nation’s plans for development will never make the terrible mistake of measuring our progress and well-being as a nation in simplistic terms of GDP increases and superficial economic growth. Long ago, in the 19th Century, the writer John Ruskin pointed out that an economy produces “illth” as well as wealth. In our national accounts these days we lump wealth and illth together and call the sum progress. To put it very simply, that is brainlessness of the first order.
