GENUINE PROGRESS INDICATOR
WHAT'S WRONG WITH THE GDP AS A MEASURE OF PROGRESS
Since its introduction during World War II as a measure of wartime
production capacity, the gross national product (now routinely measured
as gross domestic product -- GDP) has become the nation's foremost
indicator of economic progress. It is now widely used by policymakers,
economists, international agencies and the media as the primary
scorecard of a nation's economic health and well-being.
Yet the GDP was never intended for this role. It is merely a gross
tally of products and services bought and sold, with no distinctions
between transactions that add to well-being, and those that diminish it.
Instead of separating costs from benefits, and productive activities
from destructive ones, the GDP assumes that every monetary transaction
adds to well-being by definition. It is as if a business tried to assess
its financial condition by simply adding up all "business activity,"
thereby lumping together income and expenses, assets and liabilities.
On top of this, the GDP ignores everything that happens outside the
realm of monetized exchange, regardless of its importance to well-being.
The crucial economic functions performed in the household and volunteer
sectors go entirely ignored. The contributions of the natural habitat in
providing the resources that sustain us go unreckoned as well. As a
result, the GDP not only masks the breakdown of the social structure and
natural habitat; worse, it actually portrays such breakdown as economic
gain.
I. GDP Treats Crime, Divorce &
Natural Disasters as Economic Gain
II. GDP Ignores the Nonmarket
Economy of Household & Community
III. GDP Treats the Depletion of
Natural Capital as Income
IV. GDP Increases with Polluting
Activities & Again with Clean-Ups
V. GDP Takes No Account of Income
Distribution
VI. GDP Ignores the Drawbacks of
Living on Foreign Assets |
