Radio Four’s new series, ‘Economics with Subtitles‘, got off to a great start with a programme explaining why GDP growth is not a useful indicator of the success of a society.
Taking a historical approach before focussing on contemporary data, ‘How Buying Cocaine Helps the Government’, starts by charting Simon Kuznets efforts to create a universal measure of the size of an economy in depression-era USA, and his anguish at instead gifting the world the blunt instrument of GDP. Rather than providing a tool that could track improvements in well-being, we learn, Kuznet’s progeny calculates the quantity of economic activity, not its quality or benefits/dis-benefits.
In short, GDP doesn’t distinguish between good and bad economic activity. Thus, buying cocaine contributes to GDP growth and, conversely – as is documented at the opening of the show, taking a huge shipment of Class A drugs off the streets will depress GDP.
Worse, lots of important things, like environmental degradation, are not even counted in GDP and are instead treated as “externalities” that will be sorted out once the economy has grown sufficiently. Single use plastics are good for growth, but recycling is bad because it means fewer new products being produced. Unpaid cooking, cleaning and family care is invisible in the calculation of GDP, despite being essential to most people’s lives.
Nevertheless, GDP has for the last fifty years been “held up as the one number measure that can tell you everything you need to know about a country”. Politicians obsess about GDP and growth forecasts, while ignoring real evidence of rising inequality and existential risk from pollution.
Quoting a character from a Jonathan Frantzen novel, presenter Steve Bugeja complains that “economics is the only discipline where endless growth is regarded as a good thing. In biology there’s a word for that – and it’s cancer.”
My own view is simply that we now need to be agnostic about GDP. It’s just not a useful guide to success in a world that needs to grapple with civilisation-threatening climate change and obscene wealth inequality. To paraphrase environmental economist, Kate Raworth, the target of public policy should be an economy that allows everyone to thrive and to do so in a way that allows that improved well-being to be sustained from generation to generation, whether or not GDP is growing.
‘Economics with Subtitles’ bills itself as “an everyday guide to economics and why you should care”, encouraging listeners to take back control of economics. Ayeisha Thomas-Smith and Steve Bugeja do a fantastic job in that cause, providing a fast-paced, accessible and light-hearted introduction to some of the biggest issues facing humanity. On the evidence of the first programme, this is going to become regular radio-listening for markontour.