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In these days of low, if not negative, economic growth, Guy Sorman uses a post for CapX to remind us that GDP is an incomplete measure of how rich we really are:

“GDP does not convey the fact that, for example, all of us have access to drinking water at the faucet, cleaner air than in the 1960s (remember the London fog, or Paris’s darkened façades), medical treatment which did not exist ten or twenty years ago, affordable vacations at any exotic destination, and longer life expectation. Also, one century ago, most of us would spend 80% of their income to buy basic living necessities like food and clothing. Today, based on US statistics, the middle class is able to spend half of its income on products and services of their choice.”

One might object that things like plumbing, clean-ish air and disposable income have been around for quite a few decades now. Indeed, there’s a good case to be made that the improvements we’ve seen to everyday life in the last forty years are much less significant than those that took place in the golden age immediately following the Second World War. Therefore, the slowing of GDP growth, far from misleading us, reflects a deeper stagnation in the fortunes of the developed world.

Ah, but what about mobile phones? This is the trump card in Guy Sorman’s argument:

“Twenty years ago, it did not exist, but today everyone –  even the poor – can afford to possess one. Any cell phone, as we know, is a more powerful computer than the giant mainframes of the 60s. Moreover, from one year to the next, new cell phones offer more services at a declining price.”

As discussed before on the Deep End, GDP is too crude an indicator to capture the full benefit of the improving quality and affordability of the goods and services we consume:

“It is rarely or never noticed that, due to price decline and new innovations, our standing of living improves when GDP remains stagnant. GDP does not just reflect better quality of life, more freedom of choice and enhanced purchasing power due to falling prices.”

This is a point that can be expanded beyond purely material considerations:

“As frequently observed by the Anglo-Bengali economist Amartya Sen, the economics profession tends to overlook the non quantitative dimensions of our life, like freedom of speech or gender equality.”

Sorman considers the merits of alternative measures of wealth and well-being – but concludes that they are inherently subjective and therefore open to politicised interpretations. “Good old GDP”  he says, “may be imperfect but remains less imperfect than its alternatives.”

It should be added that any comprehensive attempt to measure the ways in which life has got better, would also have to account for the things that have got worse. For instance, if one looks at our society in terms of family breakdown, the collapse of community life and the increase in loneliness, one would have to conclude that we are much the poorer for it.

Even from a entirely material perspective, many aspects of our living standards are heading in the wrong direction. For instance, the most expensive and important thing that most of us will ever buy are the homes we live in – and these are declining, not increasing, in affordability and size. The cramped, noise-polluted, buy-to-rent flats we now build may be full of consumer goods that were unavailable to earlier generations, but does this really make up for a lower quality of living environment?

Guy Sorman is perfectly right when he says that GDP doesn’t record all the ways in which we’ve got richer. But neither does it record all the ways in which we’ve got poorer.

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