It's Time to Replace Gross Domestic Product (GDP)
We Need a Smarter Economic Measure to Support a Better Future
Key Problems with GDP:
- Ignores income and wealth inequality
- GDP measures total economic output but does not show who benefits from growth.
- A rising GDP can coincide with worsening inequality, where most gains go to the richest individuals.
- Fails to account for environmental damage
- GDP treats pollution, deforestation, and climate change as externalities, ignoring long-term sustainability.
- Natural resource depletion (e.g., cutting down forests, overfishing) increases GDP in the short term but harms future economic stability.
- Counts harmful activities as positive economic growth
- GDP rises when spending increases on war, crime, disasters, and disease, even though these reduce quality of life.
- Medical costs due to pollution-related diseases increase GDP but indicate a decline in public health.
- Ignores unpaid and informal labor
- GDP does not count household labor, unpaid childcare and elder care, volunteering, or community work, even though these are essential for social well-being.
- Short-term focus on growth over long-term sustainability
- GDP encourages overconsumption, overproduction, and unsustainable extraction of natural resources.
- Short-term policies that maximize GDP often sacrifice long-term environmental and economic stability.
- No measure of well-being, happiness, or life satisfaction
- GDP assumes that more economic activity equals better lives, ignoring happiness, mental health, and social cohesion.
- Overemphasizes consumption and debt-driven growth
- GDP measures consumption as a primary driver of economic success, often promoting debt-fueled consumer spending.
- Rewards quantity over quality
- GDP values more production and consumption without considering whether specific goods and services improve quality of life.
- Fails to reflect economic security and resilience
- GDP does not measure whether an economy is stable, resilient, or prepared for future challenges (e.g., automation, climate change).
- Encourages government policies that prioritize growth at all costs
- Governments set policies based on GDP growth rather than overall societal well-being.
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