The Little Big Number

How GDP Came to Rule the World and What to Do About It

Princeton UP, 2015

15 min read

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Is a higher GDP tally always good? Not necessarily, since GDP measures economic growth, but ignores any accompanying negatives – like pollution.

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Gross domestic product (GDP) is a complex measure of total economic output – the sum of all the goods and services a nation produces. Most nations and people understand and embrace the “logic of GDP” – that more of everything is better – while failing to understand its complex calculations. But GDP has serious shortcomings, says Duke University economic history professor Dirk Philipsen. Among other concerns, GDP measures only the exchange of money and fails to subtract the shared societal costs of growth, such as pollution, from the value of economic output. Putting a value on priceless resources like breathable air is one of the challenges of developing a performance indicator superior to GDP. Philipsen provides a compelling history of GDP as he dissects its flaws and misuse. getAbstract recommends his GDP exploration to readers – even those without an economics background – who want to learn what GDP counts and ignores, and why unquestioning pursuit of growth as measured by GDP could prove dangerous.

Summary

The “Logic of GDP”

Gross domestic product (GDP) is the leading measure of national economic output. It is a “blind meter” that tracks “the totality of goods and services” a country produces, calculating growth but failing to account for societal costs such as poverty and environmental destruction.

More important than the makeup of GDP is the widely embraced “logic of GDP,” which promotes endless growth on a planet with finite resources. Since the end of World War II, no major US policy initiative has successfully shifted focus away from GDP.

Global reliance on GDP magnifies its flaws. Though GDP is an American invention, countries around the world calculate their economic growth in ways almost identical to GDP.

As GDP growth becomes a central goal of public policy, those who make policy pay less attention to more challenging goals, such as advancing human welfare. Market-driven economic growth has well-known benefits, including increasing wealth, improving standards of living and providing ample consumer choices. But it also has costs, including unrelenting income inequality, poverty and environmental destruction.

Is Growth Inevitable?

About the Author

Duke University economic history professor Dirk Philipsen is a senior fellow at the Kenan Institute for Ethics and an Arts and Sciences Senior Research Scholar. He also wrote We Were The People, about the fall of communism in East Germany.

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K. P. 7 years ago

Thought provoking. As it is obvious, smaller or countries that have no push power constantly falls under the pressure of big nations or super organisations (i.e. IMF, WB, ADB etc). They don't have the right to choose! Because of they do the extension of support gets either cut off or subdued. As much as a "real need" adjusted measurement is required to ensure sustainability, the agenda of the world super power will never let the same surface to ensure the gap between poor and rich remains...
O. M. 8 years ago

Good summary, Capitalism could be revised through other lenses rather than GDP, however stagnancy will be present until no further and broaden changes take place generating innovative approaches to analyze economy

Dirk Philipsen