Visual resource: GDP is not fit for purpose

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GDP is not fit for purpose. For 50 years economists and politicians have fixated on Gross Domestic Product (GDP) as the most important measure of economic progress.

But it’s a very limited metric. GDP only measures certain types of economic activity. For example, oil spills and car crashes boost GDP. Unpaid care and a healthy environment aren’t counted.

As Dr Jason Hickel points out, our economy is so unhinged from the real world that things like pollinators, rainforests, clean air, parenting and friendship are literally valueless according to this metric. Even the inventor, Simon Kuznets said GDP is the wrong tool to measure the welfare of a nation.

GDP also has diminishing marginal returns. Although some low income countries would benefit from growth. Rich countries have largely grown past the point of it being useful.

Most importantly, we live on a beautiful, but finite planet. A finite planet = finite growth. Rapacious, uncritical growth and consumption has led us to overshoot 7 out of 9 planetary boundaries, meaning that we have gone over our planet’s capacity to sustain life as we know it.

We need to move beyond growth. The economy is a product of design and can be redesigned.

We can build a world where prosperity is measured not by GDP but by the health of our communities, the sustainability of our environment, and the inclusiveness of our societies.

So what are the alternatives to GDP?

There are hundreds of alternatives to GDP. Here are a few well-known examples.

1. The Genuine Progress Indicator
2. The Human Development Indicator
3. Gross National Happiness

If you’re interested in reading more about it, our 2020 briefing paper ‘Measuring the Wellbeing Economy: How to Go Beyond-GDP’ is a good introduction.

A wellbeing economy also offers a solution. Instead of chasing endless economic growth, we can ensure every person has a liveable income, access to health and education, and an environment that can support future generations.

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