Why GDP Fails Us and What Comes Next for Measuring Progress

For decades, Gross Domestic Product (GDP) has been the undisputed king of economic indicators. It’s the number we hear cited by politicians, economists, and news anchors worldwide, signaling national success or stagnation. But what if this single number, designed decades ago, is actually blinding us to the true health and well-being of our societies?

In our latest video, Michael Green explores the origins of GDP, its historical role, and precisely why it falls short in capturing true societal progress. We explore the historical context of the Great Depression, and how modern challenges of sustainability and equity are reshaping the dialogue.

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GDP’s limitations are becoming obvious. Here are some of the reasons why GDP’s crown is slipping:

• A massive oil spill requires extensive clean-up efforts. A rise in chronic diseases leads to increased healthcare spending. A surge in crime demands more security infrastructure. All these negative events, which decrease our well-being, paradoxically boost GDP. It's a system that can equate disaster with growth, failing to distinguish between economic activity that enhances life and that which merely rectifies its degradation.
• Our planet is groaning under the weight of unsustainable economic practices. Deforestation, pollution, and resource depletion are direct consequences of certain types of economic growth. Yet, GDP doesn't subtract the value of depleted natural capital. It's like a company's balance sheet that ignores the depreciation of its most valuable assets. The long-term costs of environmental damage are externalized, hidden from the primary measure of success.
• A nation's GDP can soar while the vast majority of its citizens struggle. GDP tells us nothing about how wealth is distributed. It doesn't differentiate between growth that benefits a select few at the top and growth that lifts everyone. This can lead to a false sense of national prosperity, masking widening social gaps and potential unrest. As we've seen globally, economic growth that doesn't translate into shared prosperity is ultimately unsustainable.

Beyond the numbers

The current global challenges, from the accelerating climate crisis to persistent social inequalities, are screaming for a more nuanced understanding of progress. We need metrics that capture resilience, equity, sustainability, and genuine human well-being.

This isn't about discarding GDP entirely because it still holds value for understanding specific aspects of market activity. Instead, it's about contextualizing it and supplementing it with indicators that paint a far richer, more accurate picture.

What is next?

The conversation around "beyond GDP" is gaining incredible momentum, driven by innovative thinkers and organizations worldwide. It challenges us to rethink what truly matters for a thriving society. That is why we are launching a podcast talking about the beyond GDP movement and how we can redefine progress for our businesses, investments, and life opportunities.

Subscribe to our YouTube channel to get notified when we publish the first episode.

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