GDP should be scrapped, says Sarkozy

[Admin]

The French president Nicolas Sarkozy has backed a report which urges governments to stop using GDP as the primary measure of progress.
The report from a group of economists said gross domestic product was treated too often as the only statistic worth focusing on.
'GDP statistics were introduced to measure market economic activity. But they are increasingly thought of as a measure of societal well-being, which they are not,' the report's authors wrote.

see the full report at
http://www.stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf

[cye bannon]

Interesting post thanks. Well done Sarkozy, it’s about time someone with influence inspected the ‘sound foundations’ of economics!

There’s 292 pages of this which I haven’t read yet, but I have a fair idea what is covered.

For those who don’t want to wade through the whole French report, I’m guessing the report highlights that growing GDP (i.e., growing the economy) is almost universally accepted by governments worldwide as a good thing and concludes that this is not necessarily so. The average person in the street regards it as an irrefutable fact that growing the economy (or GDP) is good. This 'fact' is quoted daily in the media & to me is a classic example of how we are all fed poor quality information on how our countries are progressing and how much things have improved since the bad old days.

The maths are simple: GDP is made up of household consumption, investment, government expenditure, and net exports. It's not a true measure of quality of life, and certainly not sustainability. So, when governments tell us that increasing GDP is good, they are telling us that it is good we should all consume more. Under the current definition of GDP, ‘more’ means more of any product, provided it is something that is acquired in exchange for money. Why is this good?

Another related matter (and common misconception) is that increasing one's 'Standard of Living' is a sound objective too. As economists define 'Standard of Living' simply as 'Rate of Consumption', this is the same old problem as we have with GDP. ‘Standard of Living’, being a measure only of how much we consume/spend, does not therefore necessarily measure ‘Quality of Life’. Unfortunately for us, the two terms are regularly used interchangeably. E.g., we may hear that government policy X has increased the standard of living for group Y of the population and we blindly believe this is undoubtedly a great thing, and applaud them by voting for them at the next election.

Finally, another big problem with GDP is that domestic/household borrowing is not reflected anywhere in the GDP figure. So, if households borrow huge sums and then spend it all on tat & rubbish, then GDP increases (because consumption is up) and the economy officially grows. Are we to believe this is always a good thing too?

I vote for a long recession, but one in which our consumption of overpriced, flown-in, highly processed rubbish drops dramatically, not quite counterbalanced by an increase in the average person’s spend on locally grown/manufactured sustainable produce/product.