Outdated concept of GDP – expert

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IOL economy arrows Filomena Scalise

It is high time for the world to scrap the “dangerous” and out-dated economic measurement indicator known as GDP (gross domestic product).

Instead, the world should build a new, more people-friendly and environmentally-healthy indicator system such as the GPI (genuine progress indicator), GNH (gross national happiness), HPI (happy planet index) or even an NHI (national happiness index).

This is the view expressed by Durban’s environmental planning and climate protection head, Dr Debra Roberts, in today’s edition of the international journal Nature.

Along with nine other world academics and thinkers, Roberts argues that there are much better ways of measuring our quality of life than the seven-decade-old concept known as GDP developed in the 1930s by American economist Simon Kuznets.

Kuznets himself acknowledged the limitations of GDP in measuring human welfare and cautioned against oversimplifying complex issues into a single index of economic productivity.

Roberts and her co-authors note that even former US Senator Robert Kennedy was severely critical of GDP, describing it as a system that measured “everything except that which makes life worthwhile”.

More recently, Austrian economist Frank Shostak described GDP as “an empty abstraction devoid of any link to the real world”, while others have noted that GDP fails to ascribe any value to voluntary or unpaid contributions to society by mothers and caregivers who contribute to human welfare – but without generating monetary income.

In today’s Nature article, Roberts and primary author Robert Costanza argue that GDP mainly measures monetary market transactions, while ignoring social costs, environmental pollution and degradation or the income gap between rich and poor.

Yet, despite its shortcomings, promoting GDP growth had remained the primary national policy goal in almost every country since the end of World War II.

 

The full article can be accessed at: www.nature.com - Cape Times



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