June 16, 2022
Despite the well-known problems with using gross domestic product as an indicator of human development, policymakers around the world still seem to be obsessed with it. Governments seek to promote GDP growth through all possible means, often regardless of the wider consequences for the planet and the distribution of rewards. The current focus on quarterly growth reflects a particularly unhealthy short-term perspective. And yet the International Monetary Fund and other multilateral organizations refer to GDP in all assessments of economic performance and make it the sole focus of their forecasts.
But the concept of GDP is deeply flawed. Aggregate or per capita figures are obviously blind to the distribution of income, and GDP is increasingly unable to measure either quality of life or the sustainability of any particular system of production, distribution, and consumption.
Moreover, because GDP in most countries captures only market transactions, it excludes a significant amount of goods and services produced for personal or household consumption. By making market pricing the chief determinant of value, irrespective of any activity’s social value, GDP massively undervalues what many now recognize (especially in light of the COVID-19 pandemic) as essential services relating to the care economy.
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