Societal Progress is more than just GDP growth

The impact of the Covid-19 pandemic on our society has not been limited to healthcare, with the basic rhythms of our lifestyles having been reimagined in the past months. Those who have avoided contracting the disease have suffered restrictions to their activities through both economic effects and the “lockdown” measures imposed by governments.

As the curve flattens, attention has tentatively turned towards an exit strategy, aimed at raising us out of this slump in quality of life. Our usual freedoms can theoretically be reinstated in an instant, although in reality some readjustment may be required before people feel free again. Economic recovery may take much more time, and has been the topic of much conversation in government and the popular press.

Government rhetoric around the time of economic downturns reliably centres around “returns to growth”, the particular flavour of growth unstated but almost always referring to GDP growth. This time round many commentators and environmentalists have added a twist by calling for a so-called “green recovery” that will see economic stimulus packages applied so as to decarbonise the economy.

Raising the greenness question shows that it is no longer enough for the economy simply to expand, but that the underlying mechanisms and dynamics of that expansion are important. These nuances cannot be captured by measurement of GDP alone, and so it is time that other metrics of growth made their way into the public discourse.

How should we measure the progress of society?

Society has changed due to the Covid-19 pandemic and as a result life has, by many measures, got worse. In order to make it better again, what a good society looks like, and what societal progress looks like, must be well defined. Progress is much easier to achieve when what we are striving towards is clearly outlined.

Traditionally, the metric used to analyse the success of society has been GDP - Gross Domestic Product; the market value of all the final goods and services produced. This measure has many merits. The higher GDP per capita, the more things people are able to buy (on average). In some societies a rise will represent an increase in the number of calories a person can purchase each day, in others it will represent the ability of people to buy a television and move to a house with more bedrooms. In both cases it shows people’s lives getting intersubjectively better. As GDP in countries around the world increased in the twentieth century, billions of people moved out of absolute poverty. By effectively accounting for changes that we consider to be improvements in society, rising with improvements and lowering when things get worse, GDP has been a very useful measure of societal progress.

A moment's reflection will lead readers to realise that although being able to consume more things does to some extent make their life better, it is not all there is to life. Many aspects of a good life cannot be accounted for by economic activities; life satisfaction, leisure time, security, autonomy, equality, and connection to nature, to name a few. A measure of GDP certainly can be useful in tracking improvements in these aspects, given that economic growth often correlates to more life satisfaction or increased security, for example. However, whilst mere correlation might not be good enough for some, the tracking of GDP is so well established and understood as a practice that the cost associated with implementing a completely different system of measuring quality of life may not be worth it. In the past it has not been deemed efficient to measure these other aspects of well-being individually because the information gained above that gleamed from GDP comparisons is not substantial to merit the extra cost.

Caution must be used when using GDP as a proxy for other well-being outcomes as policy goals centered around GDP can change the way it correlates with other well-being variables. Trying to improve well-being by improving GDP encounters the same problems as trying to improve disease rates by increasing peoples heights. It is true that height correlates with an absence of disease, but this does not imply that pumping children full of growth hormone to make them grow taller will be good for population health. Yes, some increases in GDP are good for well-being, but others are not so care must be taken to look beyond just the increase of GDP to see if society really is improving in the ways hoped.

Flaws in GDP

A true understanding of the progress of society can only be achieved if all the aspects of progress are adequately captured. The focus of GDP is very narrow and fails to directly measure many aspects of progress:

GDP does not account for environmental costs, such as depletion of natural resources, increased levels of pollution, and biodiversity loss. Imagine the hypothetical Society A, it has comfortable standards of living and a moderately high GDP, but its industry is heavily reliant on fossil fuels. Consequently, A’s way of life can only be sustained for another 30 years before the fuels run out, and if a new source can be found the climate change will lead to agricultural collapse in 100 years. By contrast, B has a GDP within 5% of A but sustainable transport and a power network supplied by nuclear and renewables allows it to consume 90% less fossil fuel. B, therefore avoids the future dangers of A and therefore be a much better society to live in. However, if only using GDP to choose between them, the two societies would be indistinguishable.

The value attributed to a given good or service to society is context dependent and different from its monetary cost. Additionally, goods and services have societal costs that are not captured by their monetary value. Accounting directly for these kinds of values requires a metric other than GDP.

Immaterial needs such as: community, serenity, clean air, exposure to nature, and purpose, are not included in GDP measurements but very much contribute to people's well-being. A society that provides everyone with surplus money, but no social life is deeply flawed, but this would not be captured by a GDP measurement (granting various assumptions).

GDP’s ability to report on the satisfaction of material needs is corrupted by advertising. A society exposed to more advertising may have increased needs for material consumption and therefore decreased ability to satisfy that need despite a higher GDP.

It can not be assumed that GDP and well-being correlate indefinitely. Beyond a certain threshold of GDP, well-being may plateau or even decrease due to actions required to maintain this GDP rise being detrimental to other areas of well-being.

The equality of the distribution of wealth in a society is part of its success. Measures of GDP are unable to distinguish between a society of aristocrats and peasants, and one where the majority are middle class, if they have the same GDP. Egalitarian ideology aside, orthodox economics tells us that every additional dollar of income has less value than the last. That is to say, $100 dollars improves the life of a minimum wage worker far more than a millionaire.

Beyond GDP

It is hard to overestimate the positive effects of GDP growth on the well-being of humanity. Billions of people have been lifted out of absolute poverty and suffering because they live in economies where more is available, and you get more values from the work that you do.

That being said there is more to life than just the things we are able to buy and consume. Western societies produce unprecedented amounts of things and generate huge amounts of wealth, yet they suffer from two glaring things.

Firstly, the resources consumption and environmental damage required to produce these things are unsustainable. Secondly, the wealth produced is distributed extremely unevenly through society.

Neither of these flaws can be captured by using GDP as a measure of societal success. Which is to say GDP could increase to infinity and these flaws might remain, or even worsen. If we want to progress as society we need to expand the criteria by which we measure its success.

Alternative measures such as HDI (Human Development Index) and GPI (Genuine Progress Indicator) are far from perfect, as most measures are. But if we want to build a society that helps those who are disadvantaged, and allows prosperity without destroying the planet, then we must insist on an expansion in the criteria for success. Once this is done, the full range of peaks in the possible mountain range of success will become clearer, and even if we can’t reach the highest peak, we can at least avoid falling down a crevasse in the foothills.

GDP growth dominates public discussion of society progress. This leads to progress being defined very narrowly and other opportunities for progress being ignored. It is time that politicians and commentators stopped framing the discussion in such oversimplified terms, and that we see past them when they do. No longer should we put up with being told that GDP growth comes before all else. It is time that other goals, like caring for the environment responsible and ensuring genuine increases in peoples well-being, are brought to the fore front of discussions about the progress of our society.

By Louder than the Storm Political Lead, MacGregor Cox


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