Skip to main content
rob magazine

A slew of new books attack GDP for being a metric that ignores what’s truly important. The Gross Happiness Index doesn’t actually make people happier though

Open this photo in gallery:

michael byers/Globe and Mail

Want to write a book but can’t settle on a topic? How about modern society’s enslavement in the cult of gross domestic product?

Judging from the titles on offer, there’s near-limitless demand for books decrying the role GDP plays in our lives. This year has already produced The Growth Delusion by David Pilling. Last year, it was The World After GDP. Before that: The Power of a Single Number, Gross Domestic Problem, Beyond GDP, The Little Big Number and Mis-measuring Our Lives: Why GDP Doesn’t Add Up. As a bonus for aspiring authors, every book says essentially the same thing. Allow me to summarize.

The concept of GDP was first developed in the United States during the Depression. Lacking a coherent set of national accounts, politicians had to rely on vague metrics such as freight car loadings or incidences of food riots to discern whether the economy was growing or shrinking. So Congress tasked Russian-American economist Simon Kuznets with measuring economic activity on a countrywide scale. His subsequent report revealed that between 1929 and 1932, U.S. national income shrank a stunning 40%.

Kuznets’s surveying technique was later refined by economists from Britain and Canada to become gross national product and then refined further into GDP. The presence of a reliable set of national accounts proved a miracle for government planning and economic analysis, especially during the Second World War. When the U.S. rebuilt Europe after the war, it insisted its allies adopt an identical system of economic record-keeping. Thus spread the doctrine of GDP.

GDP has since become the one indispensable number in our economic lives. Countries are ranked and compared by GDP. Canadians fret constantly about their governments’ debt-to-GDP ratios. It is impossible to think about a modern economy without referring to GDP. It is the ruler by which all other rulers are measured.

Read more from Peter Shawn Taylor: Have we gone soft? Canadians are no longer willing to move for work

Yet—and here the chorus of book-writing scolds rises in unison—GDP is a flawed measure of life. As the sum total of all paid production in an economy, GDP is uninterested in what makes things better or worse. Broken windows, hurricanes and car accidents all boost GDP by forcing people to fix what was once whole. And GDP disregards anything that isn’t paid for. If a widower marries his housekeeper, GDP falls, since his new wife is no longer charging for her services, even though the house may be just as clean. GDP ignores the environment, volunteer work and how much you love your family.

“GDP follows a deceptive logic,” writes Dirk Philipsen in The Little Big Number. “It counts everything the economy produces, even if it leaves behind…‘great furrows of wreckage.’” Nobel Prize–winning economists Joseph E. Stiglitz and Amartya Sen warn that, “in the quest to increase GDP, we may end up with a society in which citizens are worse off.” Nearly every book also mentions the heroic mountain kingdom of Bhutan, which famously eschews GDP in favour of Gross National Happiness as its preferred national metric.

On these and many other offences, GDP is guilty as charged. It is indeed a flawed, incomplete and often misleading measure of how well citizens are doing. Like democracy, however, GDP’s main redeeming feature is the complete absence of anything better to take its place.

The flood of anti-GDP books is matched by an endless, and equally flawed, stream of efforts to replace it. Most attempts at capturing a fuller range of life-significant factors collapse into crazy collages of incoherency. The Canadian Index of Wellbeing produced by the University of Waterloo, for example, counts the share of MPs’ office budgets spent mailing calendars to constituents, public education spending (i.e., teachers’ salaries) and visits to national parks as positive contributors to national well-being. It’s entirely arbitrary and just as faulty as GDP. Bhutan’s happiness index is really just a measure of Buddhist religious principles: It surveys citizens on their emotional lives (how many times in the past four weeks did you feel selfishness, forgiveness or contentment?), measures skills in such things as weaving and blacksmithing, and inquires about adherence to Driglam Namzha, or the Way of Harmony. GDP’s closest competitor is probably the UN’s Human Development Index, which combines health and education rankings with income per capita. But this rarely rates a mention in daily decision-making—it’s the People’s Choice Awards of national accounts lying in the shadow of GDP’s Oscars.

Plus, many criticisms levelled at GDP are really just hackneyed complaints about capitalism and economic growth in general. “Only in economics is endless expansion seen as a virtue,” writes Pilling in The Growth Delusion. “In biology it is called cancer.” That’s nonsense, of course. Without growth, the world would be demonstrably poorer, hungrier and angrier.

GDP was never meant to measure philosophical contentment; Kuznets’s task was simply to reveal whether the economy was getting bigger or smaller. But while GDP may overestimate economic well-being by focusing on repair bills and divorces, so too does it undercount the benefits of such costless modern wonders as Wikipedia and YouTube. British economist Diane Coyle, one of the rare authors prepared to give GDP the kudos it deserves, notes it does a good job of tracking innovation and productivity, which make possible improvements to social welfare, health care and human happiness. “GDP, for all its flaws, is still a bright light shining through the mist,” she writes in GDP: A Brief but Affectionate History.

As for the alternatives, keep in mind that life expectancy in happy Bhutan is just 70 years (158th in the world), it suffers from a troublingly high suicide rate and barely half of the female population can read or write. Measuring happiness doesn’t necessarily make everyone happier.

Anti-GDP books have become a hot new genre

The Growth Delusion A “priesthood of economists” has conspired to make GDP the most important number in our lives, says author David Pilling. Rather than creating a single metric to replace it, he suggests a “dashboard” of diverse indicators.

Gross Domestic Problem “GDP is built on a great lie” that forces humans to become consumption machines, argues anti-capitalist rabble-rouser Lorenzo Fioramonti. Community gardens, municipal currencies and local power would help transition society away from GDP and toward a harmonious state of “de-growth.”

Mismeasuring Our Lives Commissioned in 2008 by former French president Nicolas Sarkozy to find an alternative to GDP, Nobel Prize winners Joseph E. Stiglitz and Amartya Sen, plus noted French economist Jean-Paul Fitoussi, investigate ways to improve how we measure quality of life and the environment. Their conclusion? We need better data.

Interact with The Globe

Trending