Article Title : GDP News Keywords : Importance of GDP News GDP measures mainly market transactions. It ignores social costs, environmental impacts and income inequality. If a business used GDP-style accounting, it would aim to maximize gross revenue even at the expense of profitability, efficiency, sustainability or flexibility. That is hardly smart or sustainable (think Enron). Yet since the end of the Second World War, promoting GDP growth has remained the primary national policy goal in almost every country1. Meanwhile, researchers have become much better at measuring what actually does make life worthwhile. The environmental and social effects of GDP growth can be estimated, as can the effects of income inequality2. The psychology of human well-being can now be surveyed comprehensively and quantitatively3, 4. A plethora of experiments has produced alternative measures of progress. The chance to dethrone GDP is now in sight. By 2015, the UN is scheduled to announce the Sustainable Development Goals, a set of international objectives to improve global well-being. Developing integrated measures of progress attached to these goals offers the global community the opportunity to define what sustainable well-being means, how to measure it and how to achieve it. Missing this opportunity would condone growing inequality and the continued destruction of the natural capital on which all life on the planet depends. Dethroning GDP GDP was a relevant signpost of progress: increased economic activity was credited with providing employment, income and amenities to reduce social conflict and prevent another world war. The emphasis on GDP in developed countries now fuels social and environmental instability. It also blinds developing countries to possibilities for more-sustainable models of development. Soaring economic activity has depleted natural resources. Much of the generated wealth has been unequally distributed, leading to a host of social problems5. Once decent living standards were assured, human efforts should be directed to the pursuit of social and moral progress and the increase of leisure, not the competitive struggle for material wealth. Or as the economist John Kenneth Galbraith once observed: “To furnish a barren room is one thing. To continue to crowd in furniture until the foundation buckles is quite another.”The limits of GDP are now clear. Increased crime rates do not raise living standards, but they can lift GDP by raising expenditures on security systems. Weighing the alternatives Alternative measures of progress can be divided into three broad groups. Those in the first group adjust economic measures to reflect social and environmental factors. The second group consists of subjective measures of well-being drawn from surveys. The third group relies on weighted composite indicators of well-being including housing, life expectancy, leisure time and democratic engagement. Adjusted economic measures. These are expressed in monetary units, making them more readily comparable to GDP. Such indices consider annual income, net savings and wealth. Environmental costs and benefits (such as destroying wetlands or replenishing water resources) can also be factored in. One example is the genuine progress indicator (GPI). This metric is calculated by starting with personal consumption expenditures, a measure of all spending by individuals and a major component of GDP, and making more than 20 additions and subtractions to account for factors such as the value of volunteer work and the costs of divorce, crime and pollution6. Crucially, unlike other measures in the first group, GPI considers income distribution. A dollars worth of increased income to a poor person boosts welfare more than a dollars worth of increased income does for a rich person. And a big gap between the richest and the poorest in a country as in the United States and, increasingly, in China and India correlates with social problems, including higher rates of drug abuse, incarceration and mistrust, and poorer physical and mental health.
Posted on: Mon, 08 Sep 2014 10:00:52 +0000
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