Reimagining Growth
When introduced, Gross Domestic Product (GDP) was revolutionary in its ability to summarize the economic strength of a nation with a single figure and to allow global comparison. It was quickly cemented into place as the primary tool for measuring economies worldwide, as it remains today. However, in spite of GDP’s revolutionary nature and subsequent success, we have reached a point in our history where we must look beyond the narrow scope of GDP to better assess our progress, as asserted by David Pilling in, The Growth Delusion: Wealth, Poverty, and the Well-being of Nations.
Pilling does not reject GDP in its entirety, instead openly acknowledging its benefits. He concedes that it’s valuable for its ability to capture growth in a big picture way, and seemingly irreplaceable in its suitability for global comparison. However, Pilling makes these concessions in an effort to present a more complete critique of GDP as it functions in our society today. He argues that GDP is mistakenly utilized to approximate economic welfare, has negatively shaped our outlook to center on growth, and continues to overlook crucial components of well-being, like inequality. To explain his argument for its mistaken use, he gives readers a glimpse into the state of global society prior to the Industrial Revolution, wherein the concept of an “economy” had not yet been realized. Then, it was difficult to approximate the true value of a civilization’s input or output because the “economy” was either defined by the size of the population and the success of the harvest or by the total wealth held by whatever monarch was ruling the region. And in the case of a monarchy, the value of a nation was almost entirely determined by their ability or inability to finance war at a given time. Ultimately, however, rulers desired a more comprehensive approximation of their country’s economy. The first attempt at national accounting is accredited to William Petty, who mapped land and surveyed assets across five million acres of land in Ireland in the 1650s. He did so, on behalf of the government, to appropriately divide land to pay off debts to financiers of the war and issue wages to soldiers (Pilling, 2019). Petty went on to do the same in England and Wales for the purpose of improving taxation for the monarch’s sake, but expanded his surveying to begin assessing the value of land and labor and recommended that they begin keeping record of their domestic consumption, production, trade, and population growth (Pilling, 2019). These early efforts laid the groundwork for what would become the GDP of today, which was first introduced by Russian economist Simon Kuznets. Kuznets traveled to the US at the height of the boom in production following WWI and was entrusted with the task of creating a metric to gauge the economic situation. He first developed a standard for measuring the gross national product in the United States, and finalized the development of gross domestic product (GDP) 3 years later (Vanham, 2021).
Despite the success of GDP as a model, Simon Kuznets was dissatisfied with its use, as it counted variables that he had advocated against and became a symbol of a measurement other than welfare, as he had intended it to be. Pilling agrees with this perspective, and reiterates it, asserting that Kuznets intended for his proposed metric to measure the welfare of a country, not to be used as a “crude summation of all activity” (Pilling, 2019, p.24). Pilling emphasizes the negative consequences of this approach through a fitting example that discusses efforts to measure the economy in Nigeria. He delves into an anecdote about how Nigeria had long since foregone performing a census or attempting to calculate GDP, until statistician Yemi Kale was tasked with doing so. In performing his study, Kale discovered that the Nigerian economy was actually 89% larger than previously assumed (Pilling, 2019, p.114). He, reasonably, delivered what he believed to be good news. But in reality, tens of millions of Nigerians were living without water or electricity or jobs (Pilling, 2019, p.114). Despite the GDP centric determination that Nigeria was far better off than it was thought to be, it remained that 94% of Nigerians, “described themselves as poor” (Pilling, 2019, p.115). In the case of Nigeria in particular, GDP’s calculations overlooked severe wealth inequality and persisting poverty all throughout the nation. So while Pilling acknowledges the breadth of GDP as a strength, he also provides this vivid example to highlight the downside to the use of such a broad measure. Beyond the issues with breadth, Pilling also goes on to criticize GDP’s weakness in assessing the financial sector, its inability to measure quality in addition to quantity, its blindness to morality, in addition to its ignorance of pressing societal issues like wealth distribution and persisting inequality, as exemplified by the example Nigeria. He makes mention of the fact that in overlooking so many of these negatives, we are also overlooking so many positives, seeing as there are a number of factors that may contribute to the well-being of a nation that lie outside of the purview of statistics. He argues that our single-minded focus on maximization has both negative and positive costs that we choose to overlook. In continuing to use a measure that is as blind to inequality as it is to general satisfaction, we are missing out on a true measure of our well being.
Because of GDP’s blindness to so many of the components of well-being that Pilling deems important, he turns instead to alternative options. Despite the acknowledged strengths of GDP, he ultimately concludes that it has become “a proxy for well-being and the distillation of everything we are supposed to aspire to as consumers, producers, politicians, voters, and citizens” (Pilling, 2019, p.223). Following this blunt interpretation, Pilling introduces and explores a number of existing and potential options for the measurement of economics and welfare. He discusses the switch to calculating GDP per capita, finding median income, attempting to approximate inequality, calculating net domestic product, developing a specific measure for well-being, and monitoring CO2 emissions: all of which pose as a widely diverse set of solutions to the problem at hand. Pilling thoroughly explores the primary merits and limitations of each of these largely different suggestions, but conducts a separate conversation all together in regard to what he dubs “GDP 2.0”: the Genuine Progress Index (GPI). Some of his greatest critiques of GDP are that it is misconstrued as an indicator of a nation’s welfare and that it overlooks so many of the variables that should be examined in determining well-being. The benefit to GPI is that it’s similarly condensed into a single figure, but its measurement is representative of so much more. As opposed to the few broad components of GDP, GPI accounts for 26 indicators, all of which fall under 3 categories: economic, environmental, and social. The economic category includes personal consumption expenditures, income inequality, services of consumer durables, and net capital investment, the environmental category includes cost of pollution, cost of climate change, and cost of ozone depletion, and the social category includes the value of housework, cost of family changes, the value of higher education, and cost of commuting: all of which make for a far more holistic measure than that of GDP (Pilling, 2019, 226).
Upon reading through Pilling’s extensive discussion of GPI, among other alternatives to GDP, I have come to believe that GPI is the alternative measure we should be striving to achieve. When I first began reading this book, much of my thinking was along the lines of, “I understand why Pilling has issues with GDP, but I don’t think that means it holds no value,” and as I finished it, I realized that is not what Pilling intended to say at all. While he remains firm in his belief that we cannot continue to rely on GDP as we do, he advocates for the acknowledgement of its shortcomings and misuse, as well as for subsequent reform to better approximate our well-being and determine the state of our economies. GPI would allow us to do so by measuring all of these variables in accordance with their true impact on welfare. Where GDP accounts for defense spending as a positive contributor to the economy’s growth, GPI acknowledges the nuance that comes with that expenditure and instead counts defense spending as a negative. Beyond this, GPI would account for the benefits of new roads and advanced sewage systems, while also accounting for the loss that comes with destruction of natural land and longer commutes (Pilling, 2019, p.226). In explaining this, Pilling acknowledges that in tracking GPI for contributors and detractors so evenly, we will not see the same growth we may be accustomed to seeing in GDP. However, it more accurately depicts the true nature of our activity. This more realistic approximation of our gains and losses has the ability to combat the obsession with growth that Pilling so heavily advocates against. In adopting measures that are able to accurately depict the benefits and the consequences of our actions, we may be able to promote the understanding that growth and well-being don’t necessarily have to be a huge jump on the graph. In the words of the GPI calculation department in Maryland, “just because we are exchanging money in an economy does not necessarily mean that we are sustainable or prosperous” (Pilling, 2019, p.227).
While much potential exists for the adoption of GPI as a measure, there are still a number of shortcomings, as is the case with all of the alternatives Pilling ultimately chose to discuss. In looking at the Genuine Progress Index, many problems arise with the subjectivity of an index. There is value in the GPI’s tactic of assigning value to intangible assets and services, but issue with how the price of these indicators is approximated. There is value in the GPI’s inclusion of a wider range of factors, but issue with determining which factors make for an accurate measure. Therefore, despite his, and my, support of the GPI, it cannot yet be treated as a true alternative to GDP. In Pilling’s words, there are no existing alternatives as robust or as broad as GDP, making it difficult to champion GPI as a competitor. GPI would face challenges in implementation as well because it is a measure that would not be easily applied everywhere. Collecting good national statistics and performing censuses are highly expensive, meaning that the process of obtaining any missing data for the greater statistical demands of GPI would be costly and time consuming. Beyond GPI, it would prove highly difficult to encourage the entirety of the huge global economy to abandon the system the world has grown so accustomed to.
Overall, Pilling is wholly committed to our need to explore methods beyond GDP, but also concedes that we will not be seeing them implemented anytime soon. Throughout the entirety of his carefully crafted argument, Pilling is able to balance the opposing truths that there is irreplicable value in GDP as a measure and that GDP has grown beyond its means in a way that is starting to impose on the function of our society. And while he does make suggestions for its replacement, Pilling is also aware of GDP’s fixed place in our economy. Rather than calling for a loud upheaval of our economic system as we know it or challenging readers to openly advocate against our use of these measures, Pilling encourages audiences to practice skepticism in their everyday lives and to remember that there are discrepancies and limitations hidden in the big numbers we will continue to be spoon fed by the media. So while I believe Pilling has presented a strong alternative in GPI, I also believe that great progress can be made if we utilize it as a measure of comparison, as opposed to a replacement. There need not be drastic changes if we are able to first make small steps in the way of progress: and in moving away from GDP, Pilling encourages readers to recognize the value in intangible things, like the skills and expertise of workers, the mutual trust and cooperation between individuals, and the natural capital provided by our environment (Rhodes). As I have come to understand, our misplaced reliance on GDP has warped our definition of well-being and led us to believe that growth is the only indicator of success. In The Growth Delusion: Wealth, Poverty, and the Well-being of Nations, David Pilling does great work of highlighting contemporary issues with our means of economic measurement and successfully guides readers to new perspectives that enable better understanding of what welfare truly means.
