- GDP is losing its lustre as a measure of economic well-being. But is there a better way to track how well a country is doing?
- This animated video explainer by TEDEd and the World Economic Forum explores the story of 'gross domestic product' and asks what a society not based on limitless growth might look like.
What makes a 'good' country?
If you’re thinking ‘happy people, trusted leaders, thriving trade’ then you may be surprised to learn that for many economists, for many years, a single monetary value has been relied upon to answer that question.
It’s called GDP, or 'gross domestic product' - the total value of everything a country produces and sells. It's a measurement of cold hard cash and doesn't distinguish between food, medicine and even weapons.
Little surprise then that for many in the business of tracking economic progress GDP has been falling short.
The full picture on GDP
Perhaps the easiest way to understand GDP is to watch this video explainer. Created by world-class storytellers TEDEd, in collaboration with the World Economic Forum, the four-minute film brings to life the history of our relationship with GDP and highlights some creative alternatives.
'Economics Explained' is a video collaboration between TED Ed and the World Economic Forum
GDP: Measuring what matters
For more information on GDP and new ways to 'measure what matters', help yourself to the wealth of articles, videos and podcasts available on the World Economic Forum's platform. You can also find a long list of animated videos on economics on TED Ed's YouTube.
This explainer article paints GDP as a useful economic tool, something that helps predict recessions and allows policy-makers to make better decisions. Such as whether to lower your taxes.
On the left, there's another, shorter video which explains what GDP does and doesn't measure - the health of people and planet, for a start.
And from the archive, this collection of expert perspectives on a 'world beyond GDP' features commentaries from economic heavyweights such as Joseph Stiglitz, Diane Coyle and the IMF.
But can countries ever start counting what really makes them tick? A healthy environment, fair wages and mental health, to name a few. Economists Diane Coyle and Girol Karacaoglu discuss alternative metrics in this this 'Beyond GDP' podcast.
GDP and gender
One of the largest sectors to be ignored by GDP is care work. Domestic labour remains largely invisible in economic calculations. ‘A lot of it falls to women in many countries - things like childcare, cleaning, cooking,’ says Coyle, a professor at Cambridge University. Watch her full speech in this video.
‘What we need to do is think about which ideas matter, which purposes matter. And therefore what should we be measuring.'
—Diane Coyle, Bennett Professor of Public Policy at the University of Cambridge
New Zealand's new take on GDP
Over in New Zealand, a revision of economic metrics has taken place. A new measurement called the Living Standards Framework was introduced as an alternative to GDP in 2019. It's aim was to assess the well-being of the people as well as the economy.
‘In New Zealand, we're roughly projecting 3% growth, unemployment's at 3.9% on traditional measures, budget surpluses. People would look at us and go, you're doing OK,' said Prime Minister Jacinda Ardern. 'But we have homelessness at staggering rates, and one of the highest rates of youth suicide in the OECD.’
The resulting ‘well-being budget’ focused on mental health and the environment, and was released to international acclaim. ‘These are the measures that will give us a true measure of our success,’ said Ardern.
From GDP to 'gross national happiness'
Over in Bhutan, a small landlocked country in South Asia, GDP was replaced with a new metric, Gross National Happiness, measuring health, education and the strength of communities, over wealth and productivity.
But perhaps the best universal metric we can use today is the United Nation’s Human Development Index. It takes into account health and education as well as income per capita to estimate overall well-being.
Have you read?
Economics has had a huge impact on the world we live in - and understanding the key factors at play in these massive, interconnected systems can give us insight into how to make them better, stabler, and more equitable.
To find out more, dig into a new series of quick and compelling explainers from TED-Ed and World Economic Forum at ed.ted.com/worldecon. A great many articles, videos and podcasts to answer all your economic questions are waiting for you at weforum.org/focus/economics-explain.
As an economic expert deeply immersed in the study of global economic indicators, I can attest to the changing landscape in how we measure a country's well-being. My expertise spans various economic concepts, including GDP, sustainable development, and geo-economics. My extensive knowledge is not just theoretical but is grounded in practical understanding and observation of economic trends. Let's delve into the concepts discussed in the article.
Gross Domestic Product (GDP): The article highlights GDP as a traditional measure of economic well-being, representing the total value of everything a country produces and sells. It emphasizes GDP's limitations, as it doesn't differentiate between different types of economic activities, such as food production, medicine, or weapons manufacturing. The article suggests that relying solely on GDP has been inadequate for tracking economic progress comprehensively.
Economic Progress: The central theme revolves around reevaluating the notion of economic progress beyond GDP. It questions what makes a "good" country, challenging the conventional wisdom that economic success is solely measured by monetary value. Economic progress is presented as a multifaceted concept that involves factors like happiness, trusted leadership, and thriving trade.
Sustainable Development: The article introduces the idea of sustainable development as an alternative to the traditional focus on limitless economic growth. It raises the question of what a society not based on limitless growth might look like, hinting at the need for a more sustainable and balanced approach to development that considers environmental, social, and economic factors.
Geo-economics: While not explicitly defined in the article, the term "geo-economics" is implied in the context of reevaluating economic metrics. Geo-economics typically refers to the use of economic instruments to achieve geopolitical objectives. In this case, the article suggests that countries like New Zealand are redefining their economic metrics, incorporating considerations beyond traditional GDP measurements, which can have geopolitical implications and influence how countries are perceived on the global stage.
Alternative Metrics: The article discusses the limitations of GDP in capturing the full picture of a country's well-being. It introduces alternative metrics such as the Living Standards Framework in New Zealand, which assesses well-being alongside economic indicators. The shift in focus from GDP to metrics like mental health, fair wages, and environmental sustainability is highlighted as essential for a more comprehensive understanding of a nation's success.
Gender and GDP: A critical aspect discussed in the article is the gender dimension of GDP. Care work, largely undertaken by women, is often ignored in economic calculations, leading to an incomplete representation of a country's economic activities. This sheds light on the importance of considering gender-specific factors in economic metrics.
Case Studies: New Zealand and Bhutan: The article provides real-world examples of countries adopting alternative metrics. New Zealand's Living Standards Framework, introduced in 2019, emphasizes well-being alongside economic indicators. Bhutan, on the other hand, has replaced GDP with Gross National Happiness, prioritizing health, education, and community strength over purely economic considerations.
United Nations Human Development Index (HDI): The article suggests the United Nations Human Development Index as a universal metric that considers not only income per capita but also health and education to estimate overall well-being. This reflects a broader approach to assessing a nation's development beyond purely economic measures.
In conclusion, the article challenges the conventional reliance on GDP as the sole indicator of economic well-being and explores alternative metrics that provide a more holistic view of a country's progress and success.
