What the GDP report doesn’t tell us about the economy and the world

For the past several decades, society has been telling itself the same story about economic growth: that it is always good, that it should be fast, and that it is best measured by gross domestic product, or GDP. But what do we miss when we keep our attention on that one little number to tell us how everything is going? In focusing on that number, are we overlooking what it takes to achieve it?

GDP measures the monetary value of goods and services produced in a country. It contemplates things like consumption, government spending, business investments, and net exports. But there’s also a lot it leaves out, such as unpaid work, sales of used goods, and, perhaps most important, general well-being. Generally, countries with stronger and growing economies have higher standards of living. But GDP is only a decent-ish indicator of how things are going for people.

GDP has long had its fair share of detractors, from politician Robert F. Kennedy to former French President Nicolas Sarkozy to Nobel laureate Joseph Stiglitz. Critics worry that it masks inequality, which is why there is a push in some corners for economic growth measures to be disaggregated to show exactly who growth is happening for, and to make clear that it overlooks qualitative aspects of life. They also argue that concentrating too much on economic growth overlooks the costs of that growth — on the environment, on workers, and on the general state of the world.

One such critic is Dirk Philipsen, an economic historian at Duke University and the author of The Little Big Number: How GDP Came to Rule the World and What to Do About It. In his view, GDP is an “extremely destructive” metric, and the world’s continued attention to it could have dire consequences. Vox recently spoke with Philipsen about his critique of GDP and what he believes is at stake in trying to constantly grow the economy. We also touched on degrowth, a movement that calls for slowing and even shrinking growth to combat climate change, and whether he believes it’s too late to stop global warming at all.

Our conversation, edited for length and clarity, is below.

How do you think about GDP, what it captures, and what it doesn’t?

It’s the only measure that has ever existed in history, I think, that has been followed by regimes around the world, and that people from the right to the left subscribe to. It is what scholars call a “truly hegemonic” metric. That’s amazing, because it is a metric that essentially measures the well-being of capital — not of people, and not of the environment. In fact, it is demonstrably by now an extremely violent and extremely destructive metric. There is virtual scientific consensus by now that it is a terrible metric of well-being or welfare.

I wrote a book about the history of how it became established and created in the first place in the US. It came out of the Great Depression, when economists and policymakers had effectively no idea why the Great Depression was happening, and they had no data to show what was happening in the economy. So they commissioned this famous economist by the name of Simon Kuznets to come together with these figures that would give them some idea as to where and how to intervene in the economy.

That package of data that he accumulated later became the predecessor to GDP, which is GNP [gross national product]. Even he said at the time: Please don’t ever use that as the primary metric for measuring the performance of the economy, much less welfare. And that’s exactly what we ended up doing.

GDP is, by any reasonable standard, the defining metric for success of a national economy. GDP defines whether you are in the G7 [Group of 7, an informal group of the world’s leading economies]. GDP defines whether you get elected or reelected. GDP defines how you fare in comparison to other nations and so on.

And yet it’s completely indiscriminate. It only measures output — it says nothing about the quality or dissemination of the output. If all the money goes to the top 1 percent, it’s the exact same as if it is equally distributed.

So it’s mainly a focus on a topline number?

It makes no differentiation as to whether we are producing pornography or art, weapons or tools. In fact, quite the opposite. If I strip-mine the mountain and I cut down trees, it adds to GDP, but it doesn’t measure at all the costs of that. It doesn’t measure the decline in ecosystem services. It doesn’t measure the stress of people, the loneliness of people, the illness of people; it doesn’t consider any of that.

Why do people hold on to it? It’s fairly simple. It is a quite adequate measure for the success of capitalism, and it measures quite well the accumulation of money and wealth among the rich. And all of this is happening while we’re facing these really existential challenges of climate change and ecosystem service destruction. It’s a tragic irony that we’re still holding on to this metric.

In what specific ways does it make us worse, though? You say it’s a destructive measure. What destruction does it do?

There’s a British economist, Kate Raworth, who once said in a book called Doughnut Economics that there’s one graph in economics that no economist ever wants you to talk to them about. And that is the graph of exponential GDP growth. A mainstream economist would probably consider a growth rate of about 3 percent GDP every year as a healthy, robust economy. At 3 percent, the economy would have to double in output roughly every 25, 26, 27 years or so. If I showed a 5-year-old this kind of graph, they would know that that’s patently insane. This is, however, precisely the reigning economic doctrine in every country in the world with the possible exception of Cuba and Bhutan.

It is destructive because it will plunder the world, it will destroy our ecosystem, because it works people to death, because it destroys economies, because it commodifies everything.

Let me give you an analogy. Say we’re passengers on a train racing toward a cliff, and the only metric that matters in that train is its increase in speed. Whether that train has an unfair distribution of income matters not at all, what we’re destroying on the journey does not matter, whether the train is comfortable does not matter. And, in fact, not even the destination of the train matters.

I cannot dramatize this enough. The single most dangerous thing that we can possibly do right now is to continue to follow GDP growth.

What should we be looking at instead?

The answer is both super simple and super complicated.

The vast majority of people would agree we should care about the greatest well-being of the greatest number within the biophysical limits of the planet, for the most part. The problem is that we are currently operating in a system called capitalism, which requires growth. We are at this tragic moment in history in which we can say both that if we continue to grow, we will kill ourselves, and if we stop growing, we will suffer greatly within capitalism.

Capitalism requires growth. The economy doesn’t require growth, development doesn’t require growth, and welfare doesn’t require wealth. Since we are living in a global capitalist economy, when capitalism doesn’t grow, you and I know exactly what to call that: a depression, a recession, a crisis.

But the opposite is also true. If we continue to grow exponentially, that is a massive crisis. It is the reason why we are unable to address climate change successfully, why we don’t know how to address rampant inequality.

Are you saying we need to sort of stop growing, stay here, or are you saying we need to reverse course and roll some stuff back?

The economy is not the same as capitalism. So when it comes to you and I figuring out what we want the world to look like, what is important in our lives, that is something other than just simply money.

Our dominant indicators measure money output, but not the things that matter to us. Economists always claimed that there’s a direct correlation between GDP growth and well-being, but it’s not true. It’s a very tenuous relationship. You have countries that have a little more than a third of the per capita GDP of the United States, and yet by many social indicators, they do better than we do.

But there is plenty of evidence that higher GDP per capita and GDP growth are positively tied to life expectancy and infant mortality and other indicators of well-being. Wealthier countries often have better standards of living. Growth, especially for developing countries, is important.

Here’s an example: If you are starving, and you’re on 200 calories a day, and I as a doctor set you on 400 calories, and then on 800, and then on 1,600, you will get well. But if I say I have the key to your health and well-being, I will continue to double your calorie intake, what will you look like pretty soon? You will get very sick, and you will die. Absolutely no question. The exact same thing is true for the economy at large.

Was it good and necessary at some point? Probably yes. Although there are lots of caveats there, too. Is that still necessary? Absolutely not. Certainly not in developed countries like the US or Germany or France or Denmark.

What are you proposing as a solution here? In places like the US and Germany and Denmark?

There are probably 1,000 or so scholars around the world working on this question; there are hundreds of different initiatives to come up with better metrics than GDP. But the metric alone is not going to change anything. What needs to change is the operating system that is growth-dependent capitalism.

What degrowth people are talking about is not ending development or progress. What they’re saying is that we just simply cannot exponentially increase the pie any longer. There can be a lot of different versions of what that looks like, and we’ll probably have different answers in different national contexts. At minimum, what it would look like is to take out the sort of systemic imperative of capitalism to continue to grow.

That gets you into two questions: How do we create money, and who operates money?

I have done interviews with corporate CEOs who very frankly admit that the business model they’re currently operating under is not sustainable, that it will hurt the world and the planet in ways that are irreversible. But they don’t know how to change it. They say, “If I stop giving return on investment to my stockholders, they will fire me, that’s the end of that.” There are business models that work; there are a number of ways that people have experimented with.

If you’re a business constantly focused on your quarterly horizon, there’s no way you’re going to be like, “Okay, we’re just going to slow stuff down, our investors are going to be fine with that.”

Have you seen the movie Don’t Look Up [a Netflix movie about a comet coming toward Earth that’s supposed to be an allegory for climate change]?

I haven’t yet. It seems sad.

The situation is a little bit like that.

You can read, for example, the 1968 speech by Robert F. Kennedy where he launches into a diatribe about how terrible it is that we follow this metric of GDP. What he says is that “it measures everything, in short, except that which makes life worthwhile.”

We measure guns and toxic pollution and divorces and stuff, but not anything that matters. This is not a new insight. It is literally like people knowing that the meteorite is coming toward us, and it’s going to kill us, but we just simply don’t look up.

So it sounds like what you are proposing here as a solution is to basically reorganize societies. What does that look like practically, making it work in a way that we don’t need growth as much? Universal basic income? A stronger social safety net? If I’m going to work less and buy less and everybody’s going to do the same and there’s going to be less money to go around, how does that work?

Well, I know what it doesn’t look like.

There are two objections to this. People don’t like my answer that this would not be less, this would be more. This is beautifully described in a book by Jason Hickel, Less is More: How Degrowth Will Save the World.

Say I were to give you something like universal basic income. If I allowed you to live in a system where you had secure maternity leave, a free college education, guaranteed kindergarten spaces for little kids, a decent system that essentially allows for no poverty and very little crime and very little gun violence, and so on and so forth. Your life is not worse; your life is better. I’m not talking about less, I’m talking about more — more safety, more creativity, more opportunities to do what you want to do. And less slaving away for somebody who will dispose of you like a hot potato when they don’t like you anymore or have financial reasons to let you go.

The second thing that people say is, “Well, how is this going to be possible? Is it realistic?” Great question, to which I don’t have a particularly good answer other than to say, the only thing that I as a scientist can prove to you beyond reasonable doubt is that it is not realistic to continue doing what we’re doing. All the alternatives are more realistic, in other words, than what we’re doing.

Americans work so much. It’s insane. Why are we doing this?

Nobody wakes up in the morning and says, “Yeah, time to feed the GDP machine!” We’re like this because we like stuff, and because we’re unequal and want more, and for a lot of different reasons. Or am I wrong here?

This is the true sign of a truly hegemonic ideology — you don’t even have to think about it anymore. GDP is totally internalized. But when you break it down, we do, in fact, think about GDP all the time. Because what is GDP on the level of a corporation? It is growth and profit. On the level of the individual, it is like more income, better savings, better returns, better investments. All of that is just different names for the same thing. Why do you want more income? And why do you want better returns and better savings? Why do you want a retirement fund? None of these things are important to you in and of themselves. They’re only important because they are a means to an end.

If we address the ends from the get-go, we can forget about the means. In other words, if we address your desire for a good job, your desire for a good community, your desire for a safe community, your desire for a healthy climate, for fresh air, and all of that, then we can address it directly rather than always doing it by means of making more money.

So if we’re on this constant moneymaking GDP, capitalist treadmill, how realistic is it that we ever get off of it?

Politically, there is no will. We don’t have the critical mass of people who are “looking up,” in other words. The meteorite is flying toward Earth.

The climate is getting worse, and we’re passing threshold after threshold, we’re plundering the planet. People are getting less happy. Wars are happening. Democracy is falling apart. Why? All for the same reason.

Last week, on a walk from the subway in the New York heat, I definitely wondered for a while if it was just too late on global warming. Is it?

The chances that it’s too late are bigger than the chances of us turning it around; that’s probably true. I would also say, though, that there’s no doubt that we can still turn it around, and that we have more opportunities to build a much better life than anything I’ve ever seen in history.

I don’t want to spend my life sitting back and going, “Oh, fuck, it’s all screwed.” I want to spend my life trying to do whatever I can in order to create a better world.

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