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Mint
5 days ago
- Business
- Mint
Kaushik Basu: Redefine prosperity; GDP tunnel-vision could prove costly
In mainstream economics, description is routinely treated as secondary to analysis. Labelling a work as 'purely descriptive' conveys dismissiveness. Yet, as Nobel laureate economist Amartya Sen observed in a seminal 1980 paper, every act of description involves choices. Whether we are describing a historical event, an individual or a country, what we choose to include and what we leave out can be critical. Description shapes perception. And perception, in turn, can profoundly influence behaviour. Describing the state of a country's economy is a complicated task. In the past, scholars wrote lengthy volumes debating whether one country was doing better than another. But over time, globally, a single measure has come to dominate the conversation: gross domestic product, or GDP for short, which represents the value of all goods and services produced within a country in a given year. With some adjustments, it also approximates the population's total income. It is an astonishingly concise metric, often used as shorthand for economic well-being. Also Read: It's time to lay the great Indian GDP controversy to rest As Diane Coyle noted in her 2014 book on the history of GDP, its emergence marked a watershed moment in economic policymaking. Developed by Simon Kuznets in the early 1930s, GDP has brought much-needed rigour to policy debates. Politicians could no longer simply point to tall buildings as evidence of progress (though many still do). Today, assessing a country's economic performance over time means tracking the growth of its GDP. To be sure, there are other ways to assess national well-being, such as the United Nations Human Development Index and the World Bank's shared prosperity indicator. But when it comes to determining whether one economy is outperforming another, GDP (or GDP per capita) remains the default benchmark. While GDP has undoubtedly played a valuable role in modern economics, its limitations are increasingly difficult to ignore. Over time, it has become an end in itself, enabling politicians to use growth figures as a convenient distraction from persistent social and economic fractures. Growing unease with GDP-centric policy thinking was powerfully articulated in UN Secretary-General António Guterres's 2021 report Our Common Agenda, which urged global policymakers to embrace a broader set of progress indicators. Also Read: Statistical dust-up: The great Indian GDP controversy needn't have arisen As an economic indicator, GDP has three key weaknesses. First, by focusing solely on a country's total income, it can create the illusion of widespread prosperity, even when inequality is rising. GDP per capita can rise even as a majority becomes worse off. As Joseph E. Stiglitz put it in his 2010 book Freefall, 'A larger pie does not mean everyone–or even most people–gets a larger slice." But most people may celebrate GDP growth nonetheless—much like they cheer their country's Olympic medal count—without questioning who actually benefits. This concern was highlighted by the Commission on the Measurement of Economic Performance and Social Progress, which was established in 2008 by then-French President Nicolas Sarkozy and included Joseph Stiglitz, Amartya Sen and other prominent economists. Its final report called for incorporating measures like income distribution and inequality into GDP. The second weakness of GDP is that its maximization often rewards activities that undermine democratic governance. Being super-rich, after all, involves more than just owning more cars, mansions, planes and yachts. Extreme wealth, especially in the age of social media and AI, also means having a louder voice and disproportionate influence over how people think. In traditional societies, when a feudal lord entered a village council meeting, ordinary people who may have been arguing and pleading for change just moments earlier would fall silent. That same dynamic is now playing out on a global scale. Also Read: The state of India's economy is not as bright as GDP data may suggest As wealth becomes concentrated in fewer hands, and as a handful of online platforms shape what billions of internet users see and hear, many are discovering that they are losing their voice—the most essential instrument of democracy. Clearly, the time has come to develop new measures of national progress that do not strengthen the forces threatening democracy. As US Supreme Court Justice Louis Brandeis famously warned, 'We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both." Lastly, GDP can be inflated at the expense of future generations. We can and do boost GDP growth by engaging in activities that damage the environment and accelerate climate change, leaving our descendants with a scorched earth. Given this, merely acknowledging the urgency of climate action is no longer enough. To ensure a sustainable future, we must reform our most prominent measure of economic welfare so that sustainability is central to how we define prosperity. ©2025/Project Syndicate The author is a professor of economics at Cornell University and a former chief economic adviser to the Government of India.
Scoop
09-05-2025
- Business
- Scoop
UN Secretary-General Appoints High-Level Expert Group On Beyond GDP
The Secretary-General has today appointed an independent High-Level Expert Group to develop recommendations for measures that complement or go beyond Gross Domestic Product (GDP). The appointment of the Expert Group follows a request by Member States in the Pact for the Future and reflects a shared and long-standing goal. When adopting the Sustainable Development Goals in 2015, Member States committed to the development of measures of progress that complement GDP by 2030. They did so in recognition that GDP, which is heavily relied upon as a gauge of prosperity and is the basis for government targets and rankings, provides an incomplete picture of the different dimensions of sustainable development. 'This initiative could not be timelier. Every day, we witness the consequences of our failure to balance economic, social and environmental dimensions of development,' the Secretary-General said. 'To achieve the progress we need, the well-being of people and the planet must be at the centre of what we measure and value. Measures that complement GDP can enable a paradigm shift in policymaking that refocuses efforts on sustainable development and prosperity for all,' he underscored. In Our Common Agenda and the supporting Policy Brief on Valuing What Counts: Framework to Progress Beyond Gross Domestic Product, the Secretary-General elaborated the case for this initiative. He emphasized the need to overcome a 'harmful anachronism' at the heart of global policy making, in which our current metrics overlook many aspects that contribute to human well-being, while at the same time valuing some activities that harm people and planet. Complementary metrics are therefore crucial to expand the data on which policy decisions and prioritizations are made. Ultimately, these metrics can drive behavior change in how societies think about and pursue progress. In the Pact for the Future, Member States recognized that 'sustainable development must be pursued in a balanced and integrated manner', and requested the creation of an Expert Group to identify complementary metrics. Today's announcement marks an important step in this endeavor. About the High-Level Expert Group The Expert Group will be tasked with elaborating a conceptual framework that identifies key dimensions of progress, and developing an initial list of corresponding country-owned, universally-applicable indicators of sustainable development to form a dashboard that equips governments with the information they need. In addition, it will provide guidance on the deployment of the dashboard to maximize its uptake, and on priorities for data collection and statistical capacity to operationalize the dashboard and indicators. The Expert Group will closely consult with Member States and key stakeholders throughout the process, taking into account the work of the UN Statistical Commission, and building on the global indicator framework for the Sustainable Development Goals. The High-Level Expert Group will present the outcome of its work during the eightieth session of the General Assembly, which will inform a subsequent intergovernmental process. The 14 members of the independent Expert Group represent eminent scholars and experts from various domains, as well as reflecting gender and geographical diversity. The Expert Group will be led by two co-chairs, Mr. Kaushik Basu and Ms. Nora Lustig, and be supported by a technical secretariat composed of staff from the Department of Economic and Social Affairs (DESA), the UN Conference for Trade and Development (UNCTAD), the UN Development Programme (UNDP) and the Executive Office of the Secretary-General (EOSG). High-Level Expert Group Members The High-Level Expert Group members – all working in their personal capacity – include:
