Rethinking Progress: Beyond GDP Towards a Comprehensive Measurement of Well-Being

Barcelona, November 12, 2024 - The story of Gross Domestic Product (GDP) is one of success: it has been the universally accepted measure of economic growth since the mid-20th century. Originally developed to measure the size of the economy and its growth rate, this indicator became the yardstick for countries' success and a benchmark for national progress.

However, in recent years, more and more voices have suggested that GDP, despite its usefulness, is not sufficient to capture the true well-being of a society or its long-term sustainability.

In a global context marked by climate crises, growing inequality, and social tensions, there is an urgent need to adopt a comprehensive approach that includes indicators of quality of life, environmental sustainability, and social justice.

... simplifying a nation's progress to GDP growth is reductionist, as it ignores fundamental aspects of social and environmental reality.

Measuring progress: Limitations of GDP

GDP measures the value of all goods and services produced in a country over a given period. It is an effective measure of economic growth and allows for international comparisons. However, simplifying a nation's progress to GDP growth is reductionist, as it ignores fundamental aspects of social and environmental reality.

1. Human Wellbeing: GDP ignores essential aspects such as emotional well-being, mental health, and people's happiness. Countries with a high GDP can have high levels of stress, anxiety, and mental health problems. Likewise, the distribution of wealth is not reflected in GDP: a country can have a high GDP but deep inequality that marginalizes large sectors of the population, leaving those who most need support outside of "progress."

2. Social Inequality: GDP growth does not necessarily indicate that all citizens of a country are benefiting. In recent decades, some of the countries with the highest economic growth have experienced an increase in inequality. This means that the wealth generated is concentrated in a small group, while other sectors are excluded. To achieve a more equitable society, it is essential to measure how growth is distributed, not just its absolute value.

3. Environmental Sustainability: One of the most serious problems with GDP is its focus on the short term and its inability to measure environmental impact. Deforestation, pollution, and the depletion of natural resources, as well as greenhouse gas emissions, are not negatively accounted for in GDP. What's more, intensive production and exploitation of natural resources, which degrades ecosystems and compromises the well-being of future generations, can increase GDP in the short term. This creates a perverse incentive to exploit the planet beyond its limits, ignoring ecological costs.

4. Quality of Life: The "quality" of growth is another aspect that GDP does not consider. Simply producing more does not guarantee better living conditions. A materially richer society, but where air quality is poor, traffic is unsustainable, and access to basic services is deteriorating, is not necessarily advancing in terms of well-being. This highlights the need to integrate indicators that reflect the true quality of life.

   
   
   
   

New Indicators for Comprehensive Progress

In recent decades, indicators have been developed that seek to offer a more complete and humane view of progress. Below are some of the most notable ones:

1. Human Development Index (HDI): Developed by the United Nations Development Programme (UNDP), this index considers GDP per capita, but also takes into account life expectancy and educational level. The HDI is the first attempt to measure social and economic aspects together, although it still does not capture the full complexity of a society.

2. Gross National Happiness (GNH): Bhutan has pioneered this concept, which seeks to measure the spiritual and emotional well-being of its inhabitants. GNH focuses on aspects such as sustainable use of resources, psychological well-being, and leisure time. Although it may seem a “soft” measure compared to GDP, it allows for a more human perspective on development.

3. Genuine Progress Index (GPI): This index measures real economic and social well-being, subtracting the costs of crime, pollution, forest loss, and other negative factors of growth. Calculating “genuine progress”, offers a less optimistic view of growth when it is achieved at the cost of deteriorating other aspects of well-being.

4. Natural Capital Index: This approach emphasizes the conservation of biodiversity and natural resources, recognizing that natural capital is essential for sustainable development. Countries that exploit their natural capital without replenishing it, such as through deforestation or overfishing, would see a decline in their index.

5. Social Welfare Index (SWI) : This indicator is another proposal that measures aspects such as the quality of employment, access to education, health services and equal opportunities. It measures factors of social cohesion and the level of exclusion or inclusion in society.

   
   
   
   

The Need for a Paradigm Shift

Economic growth has been the ultimate goal of many public policies around the world. Governments and companies have focused their efforts on increasing GDP as a symbol of success. However, in a world where the climate crisis threatens life on the planet, inequality undermines social cohesion and subjective well-being is in decline, it is essential to rethink this perspective.

Adopting a more comprehensive view of progress requires rethinking priorities. Public policy must be geared toward improving people's quality of life, distributing resources more equitably, and ensuring that natural resources are managed sustainably. This requires structural changes and, above all, a political and social will to transform the paradigm of success.

1. Reforming the Indicator System : This is not about eliminating GDP, but rather about complementing it with indicators of well-being and sustainability. GDP can still be useful for understanding the size and dynamism of the economy, but its place as the main indicator of progress should be re-evaluated. Governments need to incorporate indicators of environmental sustainability, social well-being, and wealth distribution.

2. Fostering Intergenerational Responsibility: Environmental sustainability is essential to ensure a prosperous and healthy future for generations to come. To achieve this, progress indicators must include the preservation of natural resources and the well-being of future generations, not just the current one.

3. Cultural Change: Perhaps the biggest challenge is culture. The population and leaders must adopt a mindset that values the quality of life and the environment as much as economic growth. This means educating about the importance of new indicators and fostering a critical attitude toward the obsession with GDP.

GDP has been with us for decades, and its usefulness is undeniable. However, in a world facing increasingly complex challenges, it is insufficient as the sole criterion for progress. Today, we need a comprehensive approach that reflects human well-being, social equity, and environmental sustainability. We cannot continue to ignore the impacts of our short-term decisions on the planet and future generations.

Measuring progress comprehensively is not just a question of numbers, but of justice and responsibility. There is an urgent need to move from a vision of development based on economic growth to one that truly values life, balance and justice for all.