Development Perspectives: Blog 1. Failures of GDP

Measurement beyond gdp. My first blog below will discuss the failures of GDP. The second blog will focus on the potential indicators and what indicator sets are necessary for policy makers and the general public to evaluate in order to assess the wellbeing of people and the society in which they live. I then have briefly written on the need to re evaluate development projects. My overall emphasis is the need for constant re evaluation and awareness to accurately describe society and develop it.

Thesis: GDP fails to measure progress and the well being of nations.

National accounts have traditionally been measured by GDP, however, in many ways, the GDP is insufficient to evaluate the well being of a society. The insufficiency lies in the fact that GDP is merely one indicator, one fraction of the equation that does not represent the whole.  GDP ignores wealth variation, household production of services, international income and waste flow. Furthermore, it does not take into account the destruction and deterioration of the environment. Factors of well being such as quality on interpersonal relationships, economic security and health and safety are discounted from the GDP and therefore should not be a tool to measure the variety, quality and overall well being of a society. The GDP is unable to give us any indication to the overall state of the society on neither a national scale nor the individual scale. It is important that we synthesize all aspects of economy so that we fully capture the state of society. A complete picture will allow for measurement of progress as well as highlight the dimensions that must be reevaluated and reworked to the benefit of the whole.

The GDP is a single figure that represents the total market value of all final goods and services. It is limited and has a narrow scope.  There are several key players that have been and are currently addressing the GDP shortcomings. Riane Eisler and David Loye are the co-founders of the Center for Partnership studies. They have been working to outline the development of quality of life and well being over the past thirty years. They work to move from the traditional dominating system (with winners and losers) to a partnership system “mutually respectful and caring relations.” (CPS) Loye investigates the link between gender equality and global well being. Using the Calvert-Henderson Quality of Life Indicators Loye and Eisler has conceptualized a system to more accurately measure quality of life.

Barbara Krumsiek, the CEO of Calvert stated, “ All over the country, citizens are demonstrating a desire to engage in serious discussion about how to measure quality of life and livable communities…” Calvert-Henderson and their organization address the inadequacy of macroeconomic indicators. Their organization highlights the need and desire to redefine society. Policy makers and national attention must re focus on the areas of need and the areas of success through implementation of meaningful indicators. Both Eisler and myself do not believe we need to abandon the GDP but only elaborate on it, as it has been previously concluded the GDP is only a minor piece of the complete puzzle of a society.

Eisler’s main objection to the GDP is that it does not account for all economic activities. “For instance, GDP does not add in monetary value of ‘the caring economy,”- the unpaid care of household, children, the elderly, and the disabled family members,” Rowe exemplifies Massachusetts to examine the goods and services that are unaccounted for. The value of unpaid care time, if it received typical wages, would result in $151.6 billion annually as noted in Rethinking the Gross Domestic Product as a Measurement of National Strength. Obviously, life is more complex than the traditional GDP.  The GDP fails to acknowledge the unpaid work force that largely contributes to the well being of a society.

Biggie Smalls the rapper sang “Mo money, mo problems,” The GDP implies the more money a country has the less problems it incurs.  However, Richard Easterlin asked the question, does economic growths improve the human lot? What became known as the Easterlin paradox concluded that within a given country, people with higher incomes are more likely to report being happy. However, in international comparisons the average reported level of happiness does not vary greatly with national income per person, at least in countries with income sufficient to meet basic needs. To drive the point home Amartya Sen in Development as Freedom looks at the economic progress and wealth created in the last century in contrast with the devastating destitution, oppression and degradation of billions of people worldwide. Sustainable economic growth must be built on the improvement of individuals’ lives instead of market expansion. The gap will only continue to grow between the rich and the poor if the only concern and indicator is the GDP.

With the gap of the rich and poor growing wider, the GDP aggregated computed numbers per a capita does not assess the conditions the majority of people find themselves in. For instance in 2010, the US’s GDP was $14.7 trillion; yet, the average American has a personal debt of $50,000. Our commonly used statistics do not factor in the lives and activities of the individuals and communities. If we fail to evaluate the conditions on a local level, then we cannot take the appropriate measures to improve the overall state of a society. I will continue to look at potential indicators and necessary tools needed to measure the overall state of a society.

Work Cited

Eisler, Riane. 2007. Real Wealth of Nations. San Francisco, CA: Berret- Koehler

Publishers.

Eisler, Riane, David Loye and Kari Norgarrd. 1995. “Women, Men, and the Global

Quality of Life.” Pacific Grove, CA: The Center for Partnership Studies.

Loye, David. 2007. Measuring Evolution: A leadership Guide to the Health and

Wealth of Nations. Carmel, CA: Benjamin Franklin Press.

Rowe, Jonathan. 2008. “Rethinking the Gross Domestic Product as a Measurement of

National Strength.” Testimony before the United States Senate Committee on

Commerce, Science and Transportation, Subcommittee on Interstate

Commerce, March 12.

Sen, Amartya. 1999. Development as Freedom. New York: Anchor Books.

You tube: Global Spirit’s Oneness: The big picture featuring conversation with Riane

Eisler and Deepak Chopra.

http://www.calvert-henderson.com/about.htm.

http://www.neweconomics.org/gen/well-being_m

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