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What's wrong with using the GDP?
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What’s wrong with GDP?
Mireille Khouri - Marie Mège - Brannon Naito - Lu Sun
What is GDP?
• Gross Domestic Product is the market value of all officially recognized final goods and services produced within a country (usually calculated on an annual basis)
• The basic formula for calculating the GDP is:
GDP = C + I + E + G
Consumer spending
Investment made by industry
Excess of export over Import
Government spending
What does it NOT measure?
• 1. Health
• 2. Infant mortality
• 3. Morbidity
• 4. Suicide rates
• 5. Crime
• 6. Poverty
• 7. Environmental
health/decay and destruction of the natural environment
• 8. Infrastructure such as highways and bridges
• 9. Family breakdown
• 10. Loss of leisure time
• 11. Cost of commuting to work
• 12. Lack of civility in communities
• 13. Lack of concern for future generations
• 14. Income gap (women/men; poor/wealthy)
Alternatives to the GDP?
GPI (Genuine Progress Indicator)
Efforts to Capture the Environmental Sustainability AspectsGSDP (Gross Sustainable Development Product)
• Measures the cost of growth and development
GESDI (Gross Environmental Sustainable Development Index)
• Measure the quality of growth and develoment
The GSDP Measures:• Economic impacts of environmental and health degradation or improvement
• Resource depletion, depreciation or appreciation or finding new resources (stocks)
• Impact of people activity on environment
• Impact of people activity on availability of resources
• Impact of people activity on economic development
• The quality of environment, people, resources and development and impact of changes in these on the national income and wealth
• Impact of global concerns on the economy
• Welfare, quality of life and economic development of future generations
• Expenditures on pollution, health, flood, car accidents
• The resource stocks and productive capabilities of exploited people and ecosystems
• The impact of economic growth on biological diversity
• Impacts of social costs, health costs, on future generations and the nation’s income
The GESDI Measures (200 indicators):• People (111 indicators) – includes dimensions of social, economic,
psychological, physical and spiritual indicators as well as literacy, rights, justice, diversity, community, peace and conflict, legal and political, etc)
• Available resources (11 indicators)
• Environment (41 indicators)
• Economic Development (70 indicators)
What does GPI measure?
• 1. Unpaid work (housework, parenting and care giving)
• 2. Crime
• 3. Family breakdown
• 4. Household work
• 5. Volunteer work
• 6. Income distribution
• 7. Resource depletion
• 8. Pollution
• 9. Defense expenditures
• 10. Long term environmental damage (wetlands, ozone, farmland,
• 11. Changes in leisure time
• 12. Life span of consumer durables and public infrastructure
• 13. Dependence on foreign assets
• 14. Services (highways, streets)
• 15. Loss of leisure time (to devote to community, self, hobbies, relaxation, spend with family)
• 16. Cost of auto accidents
• 17. Cost of under-employment
• 18. Cost of noise pollution and household pollution (sick house syndrome)
List of countries by GDP:
What’s wrong with the GDP?
GDP only measures the gross, overlooking the net.
Social factors are not reflected in the calculation of GDP.
GDP encourages a single bottom line mentality for businesses.
GDP measures income, but not equality, it measures growth by not destruction, and it ignores values like social cohesion and the
environment.
• The world must adopt and standardize a different indicator to enable evaluations of a country’s social factors.
• Changing the focus on the country level will contribute to a socially positive trickle-down effect.
Questions?