The Gross Domestic Product (GDP) was created 80 years ago by the Nobel prize for economics, Simon Kuznets, who, in his studies on the relationship between economic growth and income distribution, built the classical measure of GDP (GDP = Consumption + Investment + Government spending + net exports).
Since its inception, the Gross Domestic Product has been criticized as an indicator designed to measure the well-being of citizens, as it takes into account also the exchange of goods and services (polluting products, products not good for health, etc ...) that instead of increase the welfare of the citizens reduce it.
Even Kuznets criticized the GDP as a measure of the welfare of citizens and, in a speech to the U.S. Senate in 1934, said the following words: "... The welfare of a nation can hardly be represented by a measure of domestic production such as that exposed . "
But the largest and most famous criticism was made in 1968 by the then American President Robert Kennedy, in a speech at the University of Kansas; he denounced his inadequacy as an indicator of the welfare in economically developed nations (see the video).
Over the years, the criticism grew especially in light of the fact that there isn’t a real correlation between GDP and happiness in a country. Indeed, a wild ride to GDP growth can create environmental and social disruption within a state, as we are observing. There are now associations and movements that propose new computational models that eliminate bad goods and services and give priority to those elements that improve the well-being of citizens, but that, at the moment, are not taken into account in the GDP.
Beyond the adequacy or less of GDP as a measure of well-being, what really hurts our society today is that it has entered a vicious cycle that condemns us to seek a perpetual growth of GDP which, in fact, as mentioned above , harms our current and future welfare.
Will we be able to get out of this vicious circle?
Soon in the web-site www.lteconomy.it, a pretty exhaustive article on the topic will be published, together with an interview with Erik Assaudorian, a well-known researcher of the Worldwatch Institute, Director of various publications (State of the World; Vital signs) and a specialized economist on the topic of "Economic de-growth".
LTEconomy, January 3rd, 2014
Other articles on the topic: