The Disconnect between GDP and Economic Reality

Gross Domestic Product (GDP) is heralded by policymakers, consumers, and corporations as the ultimate indicator of a country's financial status. However, reality paints an entirely different picture. On paper, a higher GDP means an increased quality of living. The connection is logical. If the economic output of a country increases, then that money surely goes to the people, right? Not necessarily. Despite growth in per capita GDP, many countries across the globe do not see an increase in the material conditions for their citizens or an increase in the well-being of their citizens. That's because the global economy is nuanced, with more than just one factor entirely controlling its direction.

Gross domestic product (GDP) is a comprehensive measure of a nation's economy calculated by the nation's total market value of all goods and services produced. GDP is an integral part of Keynesian economic theory as a way to track Britain's post-war economy. However, as famous columnist George Monbiot says, "the problem with gross domestic product is the gross bit". Since GDP only encompasses the total amount an economy produces, it often disregards the effects of production. Hypothetically, let's say a deadly car crash occurs. The cost of repairs, medical bills, and funeral costs all add up to $100,000 in the economy. GDP deems the car crash as a positive.

GDP aims for infinite growth in a world with finite resources. The measure of a nation's overall production does not consider the environment. For example, a total $1bn in revenue for car sales is only seen as a positive under the GDP outlook of the world. However, we know that $1bn in car sales will likely contribute to environmental degradation through carbon emissions. The issue is that policymakers across the globe rely on GDP as a reliable indicator of economic policy. For a country like Ethiopia, GDP is set to expand. However, the people of the Oromia region are suffering from the worst drought in 40 years, and Geze Gofa is experiencing massive landslides, leading to unsafe conditions. Unstable weather patterns and an all-time high temperature are caused by carbon emissions contributing to the greenhouse gas effect. Yet, for policymakers, a rising GDP may be a signal to continue more of the governance that has led to many precarious climate scenarios.

Clearly, the over-reliance on GDP as an economic measure can lead to drastic impacts simply because GDP does not include the negative effects of production. As Robert Kennedy famously noted, GDP measures "everything except that which makes life worthwhile". So, what can we use instead? There are many alternative metrics, such as the U.N.'s "Inclusive Wealth Report" (IWR) or UNDP's Human Development Index (HDI). All these alternatives take into consideration the economy's effects on its people. The issue, however, is the worldwide reluctance to switch frameworks. But why?

Simply put, the global use of GDP is purposeful. Utilizing a system that doesn't account for lived experiences and human harm is a tool of capitalism to decenter the economy away from humanity. GDP is a system that isn't built for humans. It is built for economic growth, regardless of the effects.

GDP does not always equate to a better life. The growing disconnect between the economy and the people represents a larger symptom of the disease that is capitalism. The economy should work for the people, not for itself. The widespread adoption of GDP as the universal indicator for a country's well-being is another ploy to separate humanity from our global economic system. That's because GDP does not account for the negative effects of economic production. Instead, GDP calls for infinite growth while disregarding the very people the economy should benefit.