Our GDP obsession

In her book GDP: A Brief but Affectionate History , British economist Diane Coyle makes a strong case on the futility of Gross Domestic Product. Several economists, like Coyle, have pointed out how GDP, which was a useful system during the (world) war years by putting a finger on an economy’s potential and position, have over the years ceased to be a honest metric that would help investors and policymakers assess the real progress of a country and economy. There are a number of reasons why GDP fails to be a truthful apparatus. For one, as Coyle candidly observes in her book, GDP ‘under-records growth’ by failing to capture fully the increase in the range of products in the economy. Like her, several economists have proven that GDP is a poor way to measure innovation and customisation.

GDP, as we know it today, fails to map what, say, preventive goods or services bring to the economy. Coyle gives the example of driverless cars. Going by technical metrics of GDP calculation, a rise in the number of driverless cars could be like the increase in the number of any other kind of car. But the benefits (social, personal) are in fact much higher than in a traditional vehicle. There are many such flaws that render GDP archaic. In this age of gig economy, big data, artificial intelligence and automation, GDP should incorporate an element of empathy, by delving into the intangible costs and benefits.

One of the best places to start is by redefining the very idea of productivity. By not understanding the contribution of service sector workforce in its fullest sense, the GDP as a measure underestimates the country’s potential. This undervaluation legitimises the high levels of income and wealth inequalities, which have been brought into focus by the latest Oxfam report.

A holistic, humane and innovative metric of GDP is needed, so that the hidden productivity of the teeming millions is recognised.

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