GDP and other ways of measuring progress
By Jessie Shier on Sunday, 31 Oct 2021
Using GDP as a measure of wealth is relatable only to the financial and business sector, and possibly government, but does not translate to individuals, where there may be stark poverty and lack of well-being.
The way that GDP is calculated focuses on a sector of society that is detached and distanced from individual lives. It is calculated from the activities of the business sector: from money spent (therefore earned) and goods produced. This excludes sections of society where there is not purchasing power. This includes only those sections that are able to produce goods and spend money on buying them. The promoted belief that wealth in a society trickles down the population and to individuals has not necessarily proven to be true. Wealth that is generated at the top of a society remains there, unless there is a mechanism for it to trickle down such as social welfare systems. Such social welfare systems currently exist in the UK, but are conditional and have stigma which exists because of the conditional nature of the system. This means that the wealth trickles down to those who demonstrate the greatest need. However, it is only a small percentage of the wealth that is given to individuals and so the individual experience is still of poverty, though the GDP may show wealth in the society. This conditional system also means people have to demonstrate need to receive a share of the wealth, and if they attempt to improve their lives through education, taking work, or some other way, the system considers that need to be reduced and reduces their share of the wealth accordingly. This results in people feeling trapped and possibly compromising their own personal development. It means social mobility is not a reality.
Calculating societal wealth using GDP does not include those who don’t earn profits and wages. Crucially, it does not measure human development or well-being, but presumes development where there are profits being made and wages being earned. This does not show the actual progress of a society.
For example, in the border region of Mexico, large factories assemble products for the international and American markets, and these produce high profits. The people who work in the factories earn wages. However, the level of human development and individual well-being is extremely low. There are no basic services in place for the areas where the workers live and so they live in extreme poverty, despite earning wages. The profits that affect Mexico’s GDP are not trickling down to the individuals and are not even staying in Mexico, but are taken by the companies running the factories.
This is a direct and stark example of how GDP can skew the measure of a nation’s development.
There are currently several alternative approaches that have been proposed by various national governments and organisations. These can be found here:
The issue with these approaches is that they assume that people need and want a job and civic engagement. The idea of work-life balance still stands on the presumption that work/a job is something that is a given. It still therefore sees human beings as things that are here to work! It does not recognise the intrinsic value of human life and human creativity, and this is the basic problem in all these systems.
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