Gross Domestic Product (GDP) – The Expression of a Nation’s Progress

A blog by Prof. Alan Lovell, a member of our Advisory Board, exploring the suitability of using GDP to measure the success of a nation.

Much has been written on the inappropriateness of Gross Domestic Product (GDP) as the expression of a nation’s performance, economic or otherwise. It is bereft of so many key factors, whilst including activities that many would challenge as part of any definition of social progress: Consider the following:

• the impacts of critical eco-systems collapse and the climate emergency are ignored;
• accelerating social, wealth, educational, health and income inequalities are ignored;
• The costs incurred by organisations as they pollute and then clean-up the pollution of the UK’s rivers and seas are included, but not the devastation caused to the flora and fauna of the rivers and seas.
• There is no recognition of the contribution of family members who remain at home to nurture and care for other family members, yet GDP recognises payments to nannies and ‘professional’ carers, emphasising that only human activities that are monetised are worthy of recognition.
• the sale of weapons of mass destruction to rogue states are included, whilst the contribution of people who undertake critical voluntary work, often to address profound social problems caused by the many fissures and fault lines in modern society[1] is ignored; and
• GDP ignores both (i) the diminishing value of all productive assets as they wear out and (ii) payments of profits and dividends to overseas owners.

Even from an economic perspective the final bullet point should invalidate GDP. And this is before one considers the fundamental omissions of ecosystem loss and the climate emergency. Even Simon Kuznets, GDP’s inventor cautioned about its limitations.  So why the adherence to this much criticised measure?

Focusing solely upon GDP confines the public narrative about national performance to a very limited, narrow form of economic language. If, over the past 80 years, the measure to calculate national performance had included those areas identified above, then we, the UK and the world, would have been shown to have been living way beyond our means.  That information did not suit key vested interest, both political and corporate.

Three questions to consider – there are many more.

• Do we truly believe we are progressing when human activity is creating such devastation to eco-systems and impacting so profoundly the climate crisis?
• Can we honestly talk about social progress in the UK when, before 1999, The Trussell Trust did not exist, but now the Trust operates over 1200 food banks across the UK and there are a further 800+ independent food banks.
• In the UK so much of its forestry and woodland is treated as a crop to harvest. Not an integral part of our being, just a means for some to make money. At around 13% forest cover, the UK is one of the least densely forested countries in Europe. The comparable figure for the EU as a whole is 38%, for the world it is 31%.

GDP is a hollow expression, increasingly redundant in a complex and dangerously changing world. Dangerous in terms of social cohesion as inequalities in the UK in all their forms grow ever wider and dysfunctional. And dangerous in terms of the climate crisis. The IPCC report published on 9^th August 2021 announced the starkest warning yet. Within the next two decades temperatures are likely to rise by more than 1.5C above pre-industrial levels, breaching the ambition of the 2015 Paris climate agreement, and bringing widespread devastation and extreme weather.

It is far from the most important change required in terms of how we live, but a radically different and inclusive articulation of national performance and social progress is desperately needed.

[1] The Office for National Statistics (2015) placed of figure of £22.6Bn per annum on all non-paid and voluntary work in the UK.