A blog from the New Economics Foundation (NEF) explores what alternative indicators to GDP can be used to measure economic growth. Annie Quick, a researcher for the NEF’s Centre for Wellbeing, will speak at the CPF 2015 session, What to Measure: Alternatives to GDP.
The UK Office of National Statistics data indicates that Gross Domestic Product (GDP) – the government’s headline measure for economic growth – has risen by 0.7% over the last quarter for April, May, and June.
This means that GDP per capita has now returned to pre-crash 2008 levels. So can we infer that the quality of life for British workers is finally improving?
Not necessarily. GDP is a crude measure of how the economy is growing, and how much money has exchanged hands between business, consumers, and everyone in between.
Because economic growth is seen as so vital to the success of society, politics tends to lose sight of what economic growth is for The quarterly arrival of GDP figures are often treated as a measure of ‘success’ or ‘failure’ on how well the government is performing. Because economic growth is seen as being so vital to the success of society, politics tends to lose sight of what economic growth is for. Growth should be a means to an end: an economy that supports everyone in society to live happy, flourishing lives, now and in the future.
But GDP fails to place emphasis on the necessary goals to achieve this, and as a measure, can have a distorting effect on our wider political, social, and economic life – and this is down to the indicators that it doesn’t consider. Rather than supporting businesses which provide decent local employment and more environmentally friendly methods of production, the GDP-above-all rules of the game favour the business which makes the most profit, by any means necessary.
Looking beyond the single measure of GDP, a clearer picture of the UK economy emerges. For example, employment levels might be on the rise, but, ONS figures suggest that job satisfaction levels, and hence the quality of roles being created are declining. In 2010, 61% of people in work said they were mostly or completely satisfied with their job, but the latest data shows that this has fallen to only 54%.
GDP does not give a good indication of what these figures mean for people’s quality of life, job satisfaction, or general wellbeing So how meaningful is GDP as an indicator of how the UK economy is functioning? While GDP is effective at measuring whether we meet economic goals and targets for growth in the short term, the focus is too narrow. It does not give a good indication of what these figures mean for people’s quality of life, job satisfaction, or general wellbeing.
Instead we need headline measures that encapsulate much more meaningful goals for our economy, society and politics, and that encourage a smarter and longer-term approach to policy-making. NEF has been working with organisations from across all sectors of British society to propose a set of indicators that can provide a broader frame for how we are doing as a nation, which we will be launching later this year. We hope this will stimulate conversation about what we value as a nation, and how we measure it to bring about a much smarter, longer term approach to policy-making.
Read the executive summary of NEF’s Brainpool Project: Bringing alternative indicators into policy.