GDP, or as we call it, Gross Domestic Product, is a monetary measure of the total market value of all the final goods and services that are produced and rendered by a country. It can be for a specific period, such as annually or semiannually. It is, and has been, the primary measure to gauge a country’s economic and financial success for a prolonged period of time.
It’s this measure of GDP that enables Europe to have such a high standard of living and an even higher standard in the world’s view. However, such is not the case, as experts suggest otherwise.
While it is indisputable that Europe’s GDP is thriving and alive, a very important factor behind its prosperity is. But it isn’t the only factor that completely reflects a country’s, let alone a continent’s, prosperity and growth. As Cornell economist Kaushik Basu points out, there are as many as 30 other measures to gauge this success.
Teresa Ribera, the European Commissioner for Competition, even brushed this claim aside as something ridiculous. She even elicited a humorous moment by calling other people making such claims about Europe “Jealous” of the continent’s success. However, Kaushik Basu of Cornell University actually backed those claims with facts and figures.
Mr. Basu suggests that GDP has played a “phenomenal Role from 1944 to roughly now, but it is beginning to backfire.” He suggests that the GDP single banner image hides intricate details. A small example provided by Mr. Basu is that countries usually rally around the GDP, a single indicator, without really providing much attention to how that entire money is getting distributed.
The GDP amount can go to ‘n’ number of individuals, and the country will be happy. But it would often be overlooked how it can also do simultaneously do damage to future generations.
While there are 30 other parameters to judge a country’s economic health, these 5 stand out from the rest for being extremely crucial.
They are – Human Rights, Environmental Sustainability, Inequality & Poverty, Happiness & Quality of Life, and Health & Education.
1. Human Rights
This is a very important factor in the modern, developing world that wishes to live as a ‘Free Society.’ GDP will not always truly reflect a country’s or society’s treatment and execution of human rights equally. Therefore, it has to be looked at separately.
2. Inequality & Poverty
GDP allows one to measure the average income, not income distribution. This painfully excludes those people at risk of poverty or social exclusion.
3. Environmental Sustainability
There must be tracking of resource consumption and biodiversity, as well as an acknowledgement that clean pollution increases GDP. But a healthy environment does not increase GDP. It is a major paradox of the fundamental limitation of traditional economic measurement.
4. Happiness & Quality of Life
GDP alone can be a unifying factor for all people’s happiness and quality of life index. Life satisfaction, job satisfaction, and emotional health, among others, also require their own surveys, such as those analyzed by Eruofound.
5. Health & Education
Both health and education are long-term indicators of societal prosperity.
Mr. Basu has pointed out that all the 30 factors he listed need not be treated with equal seriousness. He mentioned that some are more important than others, but that every factor should still be considered. The salience should only be given to the few.
One such factor Mr. Basu highlighted is the inequality in wealth distribution, which barely affects the GDP. Mr. Basu stated that while this has always been a problem historically, it has become an increasingly problematic issue in recent years. That’s because of the spendthrift nature of the super ultra-rich people of a nation.
He said that the top 1-2% wealthiest people often bought sports cars, yachts, lands, bungalows, and properties, among others, in the past. But today, they also get easy access to social media platforms, news channels, and other narrative-driving platforms. Hence, this stretches the inequality of wealth to the inequality of voice and freedom.
The weak and the downtrodden of a society will lose their voice, the one thing they could always rely upon. This is another reason why GDP must be carefully looked at to adjudge a nation, let alone a continent’s, well-being and growth.
Mr. Basu also emphasizes sustainability, given the existing nature of climate change and the global warming crisis felt all across the planet. When left unchecked, GDP will continue to grow in a society. But it will come at the expense of their progeny or future generations. Therefore, the GDP must be kept in check in this regard as well.
